As the senators in the United States Congress maneuver a health care bill of massive significance for the insurance industry, let’s a take a closer look at the wave of disruption that has firmly placed the insurance industry and Insurtech in the spotlight of the cross industry technological wave borne out of the great recession.
Insurtech joined the party at a later stage than its related counterpart Fintech. Given the revenues volumes and investment flowing into both these sectors, in 2014 insurance premiums amounted to $3,8 trillion while banking revenues were $3,6 trillion, it does come off, initially, as a surprise but a closer look at consumer relationships and regulatory changes in both spaces do provide an answer.
In considering the early uptake of Fintech or Bankingtech; first, insurance is a very passive product. Ideally, consumers have limited contact with their insurance provider , because ideally nothing goes wrong. Around 70% of all insurance customers interact with their provider only once a year or less. In comparison, the study states, consumers interact with banks 200 times per year on average, compounding the level of dissatisfaction and frustration.
Furthermore, the wave of regulatory changes introduced after the 2008 financial crisis, forced the banks to put massive efforts into adapting to the new rules. Financial regulators, most notably the American Department of Financial Services (DFS), the Fed, and others, started investigating banks more closely and burdened them with heavy fines, as well as more compliance enforcements. This forced the banks to restrict their business and shift resources, opening up a tremendous opportunity for innovative startups in the banking industry, from non bank lending, because banks could no longer provide enough capital, to consumer friendly apps and efficient payment solutions. The dissatisfaction with the banking sector on issues of inclusion, transparency and consumer agency further prompted a significant exodus of talent from the banking sector and related financial services to pursue solutions to these issues. The insurance sector encounters the same issues but due to relatively limited exposure, focus and the passive nature of consumer engagement, did not experience the same forces of change that both the public and regulators demanded on financial services.
Fast forward a few years down the line, according to data from CB Insights, global Insurtech investment totaled $1.7 billion, across 173 deals, in 2016. Both those numbers are roughly double what they were in 2014. In terms of total investment, 2015 was actually the bumper year to date, at $2.7 billion, although $1.4 billion of that was due to two mammoth investments, the financing of Zenefits and Zhong An.
In January 2017, investors from around the world were asked what the hottest are
via group.growvc.com
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