The Rise and Rise of InsurTech
In another sign that InsurTech is one of the fastest growing and exciting FinTech sectors, the first InsurTech firm went public recently. ZhongAn Online Property and Casualty Insurance, floated on the Hong Kong Stock Exchange at HK$59.70, raising US$1.5bn, valuing the firm at US$10bn.
According to the Financial Times, Zhongan is backed with venture capital and equity finance by some of China’s largest finance groups and the public floatation has helped bring in prominent investors including the Japanese firm, SoftBank. Additionally, the big Chinese online firm, Ant Financial (an affiliate of Alibaba), is also a large shareholder in the online insurance firm.
InsurTech firms offer insurance services entirely online or via smartphone technology and claim to utilise machine learning, artificial intelligence, and other sophisticated algorithms. In theory, this provides a better, quicker and more effective service than you would get from a traditional insurance broker. As a result, they say they can offer a range of insurance, from health to travel, at lower rates because they are more able to predict the likelihood of a customer needing to make a claim.
ZhongAn also follows in the footsteps of many FinTech firms, by offering a more attractive customer service experience, from a more client-focused viewpoint. The firm says for example that it offers customers personalised insurance products, which vary from person to person rather than a blanket product and price. It says that customers can also customise their insurance premium, which is more tailored to suit the individual and is harnessed with “intelligent” technology rather than a generic “one-size-fits-all approach” that traditional insurance companies might provide.
ZhongAn also partners with a number of major public firms like China Citic Bank and Baidu to boost its offering and to reach a wider customer base. As a testament to this, the InsurTech company claims that in 2016 it managed to sell 5.8 billion insurance policies to 460 million customers across the globe, in only three years.
This was seen as an astonishing figure for an insurance company and it said that in only one day it had managed to sell 100 million shipping return policies. Despite this, it is thought the company actually makes a loss rather than a profit at this point, and in the first three months of last year it reportedly lost RMB202 million.
However, the company seems to go from strength to strength and losses aren’t uncommon for FinTech firms, especially in their early stages as they seek to expand. Since its IPO ZhongAn’s stock has also jumped 18%, an incident that some are saying could lure technology firms away from New York.
ZhongAn’s success also comes at a time when other InsurTech firms are seeking to get a foothold in other countries, such as the UK and US. A number of firms such as Lemonade in America are seeking to replicate FinTech methodologies in the world of insurance, in order to disrupt the traditional insurance space.
Lemonade is a home and rental insurance firm that claim they can provide insurance within 90 seconds and only three minutes to get paid. It claims to do this nearly “instantly” with Maya, a “charming artificial intelligence bot” that will create a personalised insurance policy. Furthermore, it sets itself apart from traditional bricks and mortar firms by offering a “zero everything” service where customers don’t have to worry about deductibles or rate hikes again.
The firm also says that for the “first time ever” customers can claim low-value items such as small electronic devices to clothes, such as jackets. It says it can also provide insurance at reasonable prices such as monthly renters insurance at only US$5 a month and homeowners insurance for only US$25 a month. To make it easier for those already insured, they claim you can switch to Lemonade instantly and that a large number of people are already switching to the firm – this includes 10% of customers from Liberty Mutual, 19% from Allstate and 16% from State Farm.
Another InsurTech firm making waves is AllLife, a medical online insurance firm that offers cover for specialist ailments such as HIV and diabetic life insurance and disability cover. From South Africa, the company has recently expanded to the UK, partnering with the firms Royal London and Gen Re – companies with ties to the billionaire investor Warren Buffet. Like other InsurTech firms, AllLife claims to use an algorithmic pricing platform and offers better value insurance claims by accessing a large quantity of medical data to automate processes that traditional firms do manually.
Furthermore in the UK, while there aren’t many firms that have got the coverage as Lemonade or AllLife, companies are certainly eager to invest in the space. Last year, insurance comparison site Vast Visibility received a huge investment from European private equity firm, HgCapital. The same investor also acquired A-Plan insurance in 2015 – another signal that the insurance and InsurTech market is only set to grow.