Start-ups can help carriers accelerate revenue growth from connected insurance.

Connected insurance offers carriers huge opportunities to push up profits and grow new markets. Global revenues from connected auto, home and workplace insurance, and allied services are expected reach as much as US$177 billion by 2023.

Insurtechs are likely to play a key role in helping carriers secure a big slice of the burgeoning connected insurance business. As traditional insurers transform themselves into digital “living businesses”, that adapt quickly to meet the changing needs of their customers, insurtechs can provide invaluable insights, technology and products.

Many insurtechs are already becoming trusted partners that are helping carriers navigate the challenges of digital disruption and establish new connected revenue streams. New York insurtech Sure, for example, recently teamed up with Chubb to provide on-demand insurance to passengers of ride-sharing services such as Uber and Lyft.  Fellow New York firm Kinetic is partnering with specialty insurer the Argo Group to supply its wearable devices to reduce work injuries at retailers and restaurants. Plenty more such partnerships are likely to be sealed this year.

Bringing insurtechs on board may be just the impetus big carriers need to start building long-term, lucrative connected insurance businesses. The enormous potential of connected insurance products is without question. However, revenues from such offerings have to date been modest.

The connected vehicle business is the most mature connected-insurance sector. Lots of carriers are collecting substantial user data that’s helping them improve risk management and pricing. Nonetheless, the value proposition for customers has changed little. We’re a long way from seeing comprehensive ecosystems that deliver a wide spectrum of highly personalized integrated services, from insurers and other providers, that constantly adapt to changing circumstances. Connected insurance offerings in the home and workplace lag even further.

In the next few weeks l’ll discuss how insurtechs can accelerate the development of the connected insurance market. I’ll look at some of the promising start-ups in the auto, home and commercial insurance markets. Specifically, I’ll examine how these companies are aiming to disrupt the insurance business, what parts of the value chain they’re targeting and how incumbents can learn from them, and perhaps work with them.

One of the key strengths of many insurtechs is their understanding of consumers. Our analysis of CB Insights data shows that around half the insurtechs that received funding in 2017 were looking to disrupt traditional marketing and distribution channels (See illustration below).

Where insurtechs are setting their sights

The proportion of annual insurtech funding deals that address each of the key sectors in the insurance value chain.

Understanding and meeting the needs of customers, not just recognizing the potential of ever-improving technology, is going to be crucial to the success of connected insurance offerings.

Our research shows that many consumers are keen to receive bundled financial services that address specific aspects of their lifestyles. Just over half, for example, are interested in complete home-care packages that combine insurance, repair services and utilities such as water, electricity and rates. A similar proportion expressed interest in comprehensive car-care packages that include insurance, performance-monitoring, maintenance and driver-training. There was also strong interest, 42 percent of respondents, in integrated home-buying services that comprise property searches, financing, insurance and legal services.

Much of the growth in revenues from connected insurance will come from bundled offerings that seek to satisfy the ever-growing demand among consumers for comprehensive on-demand services.  Insurtechs are likely to be valuable allies that help insurers design, develop and deliver this new generation of connected-insurance offerings.

In my next blog post, I’ll discuss some insurtechs that are looking to disrupt the connected auto-insurance business.

In the meantime, read about the Top 10 Insurtech Deals of 2018 here.

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