Insurtech Global Outlook 2024 by NTT DATA
In 2023, Insurtech funding experienced a second consecutive year of decline from the peak in 2021. But, according to NTT DATA, this shift in investments does not necessarily indicate a burst bubble but rather a market adjustment. NTT DATA has been exploring the Insurtech sector in their Insurtech Global Outlook 2024, where they reveal three simultaneous waves, each defined by the key technologies of their time. This progression showcases the integration of innovation with insurance, from the rise of digital platforms to the advent of AI. We sat down with Richard Calvo López, Head Insurtech at NTT DATA EMEAL to discuss NTT DATA’s findings in the report.
Richard, which three waves are you highlighting in the report?
The three waves we are highlighting, showcasing the integration of innovation with insurance, are:
- Digital Insurance Wave - Make insurance attractive: Leveraging digital technologies in a B2C model to transition from traditional paper-based processes to digital services, making insurance more digital and accessible.
- Connected Insurance Wave - Beyond Connected Insurance and Fast Learners: Adoption of the Internet of Things (IoT) and Artificial Intelligence (AI) for real-time data in B2B2C connectivity, enabling personalized policies and dynamic pricing based on actual behavior.
- GenAI Insurance Wave - Next Big in the AI era: Integration of GenAI and deep techs with potential impacts across the insurance value chain, addressing challenges in various societal domains.
Can you elaborate more on what kind of insurtechs play a role here?
Insurtechs emerge as a pivotal force in the insurance industry. They are categorized into disruptors, enablers, and catalysts. Each of these categories plays a distinctive role in shaping the industry’s future through innovative applications of technology. We can distinguish three categories and let me give you some examples of companies as well:
- Disruptors in the Digital Insurance Wave (Wave 1.0) – making insurance attractive: Introduced novel standards in customer experience, claims processing, and pricing strategies. Powered by advanced AI technologies and digital platforms, they challenge traditional insurance models in terms of efficiency, accessibility, and customer-centricity.
- Lemonade – core technology application
- OSCAR – customer-centric approach
- Metromile – disruptive pricing strategies
- hippo insurance – efficiency and speed
- Enablers in the Connected Insurance Wave (Wave 2.0) - beyond connected insurance and fast learners: insurtechs play an enabling role in the insurance ecosystem by leveraging emerging technologies and data sources to drive innovation and efficiency across various segments of the insurance industry.
- Alan & boltech – facilitation of new business models
- Descartes, Tesla & BYD – emerging tech and data sources
- Progressive & Cambridge Mobile Telematics – enhanced customer engagement
- Path, gravie & Tractable – claimless solutions
- Catalysts in the GenAI Insurance Wave (wave 3.0) – next big in the AI era: Transformation in high-stakes insurance, particularly in response to emerging risks and opportunities associated with climate change, GenAI, and cyber risk. This is a proactive approach to drive change in industry evolution during the present AI era.
- LULA, HUMA & Sixtfold – innovative model
- Aktivolabs & Safehub – Efficiency and cost reduction
- AWS, Swiss Re & Cowbell – adaptation
- Reask & Corvus – Risk management & Resilience
Regarding wave 1.0 – how do insurtechs win in the digitalization insurance wave?
The public insurtech is struggling, but there is a path to profitability; strategic movements that are working towards profitability, and a more sustainable business model. Public insurtech companies are prioritising growth as their main objective. Next, companies are restructuring their financial frameworks to increase cash flow, facilitating business expansion. Lastly, the growth prospects of public insurtechs are fueled by rising revenue streams, expanding asset portfolios, and robust market demand.
Lemonade has shown a steady revenue growth and gross margin improvement with an increase of 2M customers (+21% than the previous year) and a revenue growth of 55% YoY, demonstrating a great ability to gain more customer base and boost the revenue. This growth has been strongly connected with marketing efforts due to their focus on profitability. But they have seen higher than expected growth in the first quarter with a clear cost moderating goal. The loss ratio has been a focal point of financial performance, with a reduction of over 10%, standing at 83% compared to 94% in Q3 2022.
Regarding wave 2.0 – in what sectors can insurtechs use the connectivity to transition to proactive risk prevention?
Several factors, such as the rise of IoT and AI, the high cost of living, inflation, and climate change, exert pressure on insurers to adapt and innovate, foster collaboration across the ecosystem, drive innovation, and enhance customer experience.
We observe four distinct sectors that mark the transition towards a more integrated and preventive approach, including insurtech and incumbent examples:
- Smart Mobility – Incentivize drivers for better driving behavior with lower claims and better prices
- Enablers: Otonomo, Cambridge Mobile Telematics, Tesla
- Incumbents: Progressive, Allstate
- Healthy Living – Influence customers to lead healthier lives by preventing illness and building long-term profitability
- Enablers: Yulife, Vitality, Amazon
- Incumbents: Ping An
- Home – Enhance safety and secure peace of mind by leveraging data to tailor coverage and elevate insurance experience
- Enablers: Lemonade, SHIFT, Ikea
- Incumbents: HSB, Amica
- Business Shield – Educate customers with simple and transparent products with faster response and higher resilience
- Enablers: Descartes, FloodFlash, Coalition
- Incumbents: Generali, Tokyo Marine
How do insurtechs win in the Connected Insurance Wave?
Leaders in this wave are harnessing telematics, embedding insurance into everyday services, and pioneering claimless solutions to redefine the customer experience and streamline industry operations. Other winning models include hybrid distributions, employee benefits, and easy integration with API. First movers and fast learners embrace competitive advantages and business model innovation respectively.
Innovative strategies need to be leveraged to streamline costs and enhance revenue. Advanced technologies like AI, UBI & IoT, and embedded models need to be adopted to drive the transition towards a customer-centric industry reshaped by digital-first customers. Current consumers expect digital services and a liquid customer experience. It is thus essential to move from a product-oriented to a customer-oriented vision, this includes deploying an ecosystem strategy to meet evolving needs.
Regarding wave 3.0 – how to win in the GenAI Insurance Wave?
The investment portfolios of IT giants show a rise in GenAI investing trends in 2023. 40% of GenAI acquisitions are made up of Tech Giants (Google, Microsoft, Amazon, etc.).
To win in the Third Wave, we have to look at the current challenges of all the industries. Climate change, cyber risk, and the rise of Gen AI all impose the need for new insurance models and products as emerging technologies and the world landscape create new risks.
Mind Foundry, is a company that developed a model to detect signs of cognitive decline before accidents occur. By analyzing telematics data and dashcam footage, they can identify unusual driving patterns indicative of cognitive decline. This proactive approach is a total revolution in the way insurers assess risks and mitigate large loss incidents, moving beyond traditional predictors like car type, car color, or driver age, discovering that large losses are related to experienced drivers and known roads.
Sixfold uses GenAI capabilities to create detailed client profiles, including key risk data like family medical history or identifying inconsistencies in open data, such as medication usage that doesn't match the client's health status. This enhanced analysis augment underwriters' ability and to more precise underwriting and reduced their assessment time by 50%.
In the land of cyber risk, At-Bay partnered with Microsoft to significantly reduce ransomware attacks for its policyholders, achieving an 80% reduction compared to the industry average. In November 2023, At-Bay achieved the Amazon Web Services Cyber Insurance Competency, recognizing the company as an AWS partner that helps customers enhance their security and access affordable cyber insurance policies through AI predictions. At-Bay recently surpassed $160 million in annual recurring revenue on 800% YoY premium growth.
NTT DATA at ITC DIA Europe Amsterdam
Get to know more about the Insurtech Global Outlook 2024 report in the Digital Deep Dive session. Delve into the latest trends, innovations, and opportunities shaping the future of the industry here. For the full Highlights Report, including use cases supporting their findings click here.
NTT DATA is a Premium Partner at ITC DIA Europe Amsterdam. They will organize a kick-off summit on the 11th of June. On the main event days, they will hold a round table and a Deep Dive presentation!
