How Insurtech Is Rapidly Changing Insurance And Health Tech Industries
Vladislav Solodkiy, managing partner at Life.SREDA VC, for Forbes
In our recent fintech report “Money of the Future,” we’ve talked about $3 billion in new investments in 2015 in insurtech. Sounds impressive, doesn’t it? Auto insurance companies just in the U.S. spend a total of $6 billion in advertising each year. It means you are a “customer-oriented” and “tech-advanced” company when you are spending twice on advertising more than on real innovators. But several traditional insurance big players – like Chinese giant Ping An – are showing us great examples of how to change your vision in accordance with demands of the new digital era.
The average age of life insurance agents is 59 years old, and it’s estimated there is an average of three duplicate processes in each customer sale. It’s not out of the realm of possibility that your insurance company will at some point ask you to fax them something. Anyone who’s ever had an insurance claim knows that getting paid can often turn into a nightmare. Dan Ariely, a Duke University professor and the Chief Behavioral Officer at Lemonade, explained why it happens: “Every dollar your insurer pays you is a dollar less for their profits. So when something bad happens to you, their interests are directly conflicted with yours. You’re fighting over the same coin.”
Today’s consumers want to be able to get educated, get a quote and buy a policy from the comfort of their home or car via smartphone in less than 15 minutes. Just as fintech is transforming the banking world, “insurtech” has set its sights on the insurance industry. Endemic mistrust and persistently low net promoter scores are providing a ripe opportunity to use technology to shift power back.
Today’s world is driven by data. There is a huge opportunity for insurance to leverage big data and online-scoring platforms to help improve their operations in everything from sales to underwriting. Real-time and near real-time data streaming — everything from environmental sensors to connected devices and wearables — will allow insurers to better manage risk, improve subscriber loyalty and optimize sales opportunities.
Personal financial management (PFM) services have been actively cooperating with insurers even before. Blockchain will be useful to the safekeeping of insurance history, the issue of policies and their “journey” between those who issue them, buy them and request them.
IoT is improving insurtech and healthtech in many ways. Kleiner Perkins Caufield & Byers (KPCB) said that 2015 was a very important year for wearables as the market took several important steps. After the hardware matures, the innovation moves to software and services. The Food and Drug Administration (FDA) reported that approximately 500 million smartphone users around the world will be using a mobile medical app this year. This number is expected to grow to 1.7 billion smartphone and tablet users by 2018. Gartner projects there will be 6.4 billion connected things in use worldwide in 2016 (a 30 percent increase from 2015), and that the market will grow to 20.8 billion by 2020.
With healthcare, we have a very outdated and inconvenient system too. We need to call a doctor two weeks in advance for an appointment, wait 30 minutes in a waiting room and then talk to a doctor for only 15 minutes while he types away on a laptop, only occasionally making eye contact with us. And, all of this at a huge cost that is growing at an unsustainable rate.
Healthtech investments are booming
Digital healthcare funding hit nearly $5.8 billion in venture funding in 2015 ($4.3 billion in 2014) – two times more than in insurtech. It is very difficult to see a border between insurtech and healthtech today; lines are blurred. Healthtech startups abound these days, and will gather your data to improve your relationships with insurance companies (or startups), reduce your expenses, hedge risks of insurers, and make customer service better.
Tissue Analytics lets you take pictures of a wound over time on your smartphone, allowing doctors, like the ones on the Online clinic, to determine whether it’s healing or festering. AliveCor lets you capture an electrocardiogram at home and alerts doctors if something is wrong with your heart. Netra Labs lets you take eye tests at home using mobile technology. Period tracker Clue has become the world’s fastest growing female health app (or so it claims), with four million monthly active users. Px HealthCare’s mobile apps provide people with cancer with personalized information and tools to manage their condition. Revere Care’s app lets people in need of care book a carer, a doctor or a nurse “at the click of a button” by connecting them via a “digital carer marketplace”. Knok lets people book face-to-face appointments with GPs, pediatricians and psychiatrists. TalkLife is a peer-to-peer support network for youth mental health.
What insurtech can learn from China
Shanghai-based Ping An Health Cloud, operator of mobile healthcare app Ping An Haoyisheng, has completed the latest $500 million funding round, which boosted the company’s value up to $3 billion. Ping An Haoyisheng is an online platform that allows users to consult with doctors through text, pictures, and video. They probably can buy their European competitors for geographical expansion reasons. Europe’s DocPlanner, an online booking platform for healthcare appointments, has raised a $20 million Series C round, and at the same time is announcing a merger with Spain’s Doctoralia. Doctoralia claims 9 million users monthly and is available in 20 countries. DocPlanner on the other hand, claims 8 million monthly users and is available in 25 countries.
Hong Kong-based Horizons Ventures, a private investment arm of billionaire Li Ka-Shing, has led a US$15.3 million funding round in Berlin-based P2P insurance startup Friendsurance. (Recently Number26, a German digital-only bank designed for smartphones, has raised $40 million from investors including Li Ka-Shing.) The way the model works is that everyone contributes to a common pool to mitigate risk, that’s the very nature of insurance. However, in Friendsurance’s case any premiums left over in the fund at the end of year are paid back to contributors, as the risk didn’t happen.
China’s internet giant Tencent recently acquired a major stake in Guahao, a startup that grew a massive user base as it enabled real-time geolocated physician appointments. And there’s a hardware and medical device arm – evident in the company’s recent unveiling of its own glucometer.
Chris Skinner, managing partner of The BB Fund, recently wrote that the digital transformation has reached insurance, as one of the last big offline industries. There are big barriers to entry, but while insurtechs do not have all the answers and the solutions yet, they are best positioned to find them. We have only seen the beginning of the amount of talent and money that will pour into this industry. “Companies who think they can still wait a couple of years until they start to embrace digital innovation will cease to exist 10-15 years from now,” says Skinner. “There is a huge potential to do more business and at the same time create a much more customer friendly industry.” And he is recommending spending more attention on what Asia is doing, because the region is more open for innovations.
Vladislav Solodkiy is managing partner at Life.SREDA, Singaporean-based fintech VC, and the author of “Money of the Future” semi-annual fintech-report.
First appeared at Forbes