Emerging Technologies in Insurance: Increasingly, emerging technologies are underpinning InsurTech solutions

Over half of applicants to this year’s program employed emerging technologies such as Artificial Intelligence (AI) or the Internet of Things (IoT) compared to 40% last year, an increase of 13% percentage points. Moreover, in certain categories, emerging technologies are playing an even more important role. Two-thirds of applicants with businesses based on underwriting and risk management are deploying an emerging technology – such technologies clearly have the potential to drive change at the very core of the insurance operating model.

This is an important trend. While InsurTechs are naturally keen to be understood for the commercial value they could drive rather than the intricacies of their primary technology, the large numbers of start-ups making compelling use cases for emerging technologies means the broader industry must get to grips with such tools. Aerobotics, an aerial data analytics company and member of Startupbootcamp's 2017 cohort, is one such example. It uses drones to capture high resolution imagery of farms and then applies machine learning to provide insight into crop health to farmers. It now aims to deliver an agricultural insurance product that benefits both farmer and insurer, all year round. Of the emerging technologies we have seen, we look at four in more detail here.

I. Artificial intelligence

Artificial intelligence (AI) in particular has caught the attention of the InsurTech scene this year. In a data-driven environment such as insurance, AI offers not only the opportunity to derive insight at greater speed and with greater accuracy but also to derive new insight too. And the possibilities for insurance stretch across the value chain, from the back office to the front. Of the Startupbootcamp applicants this year alone we saw AI solutions focussing on:

• Claims and benefit management
• Products and pricing
• Sales and distribution
• Underwriting and risk management
• And many single solutions with a range of applications across the value chain

And this is just InsurTechs that have AI as their main proposition. The vast majority of InsurTech start-ups in the ecosystem use AI to the point that it is essentially ubiquitous. Notably, 80% of Startupbootcamp’s 2017 cohort used AI in one form or another. For start-ups, it makes complete sense. It is often the most efficient means of completing a particular task.

Moving forward, “the growing maturity of AI (machine learning) and data ubiquity will facilitate the insurance industry’s evolution from a ‘protection’ model to a ‘preventative’ model” suggests Mark Falconer of LV=, “such a move doesn’t suppose that ‘insurance’ will no longer be required, however it does mean we will have to re-define what ‘insurable risk’ is, and in doing so it will surely make more ‘risks’ insurable”.

II. Robotics

Last year’s Startupbootcamp analysis suggested robotics would also make a splash in the InsurTech sector and this prediction appears to be coming true – this year’s program received three times as many applications from firms using robotics applications. The emergence of robotic process automation (RPA) and intelligent process automation (IPA) is potentially exciting for a range of insurance use cases.

III. The Internet of Things

Elsewhere, the Internet of Things (IoT) continues to excite, though only 13% of applicants to the Startupbootcamp program this year relied on it to underpin their proposition. Given the applications in insurance of concepts such as connected health, the connected home and wearables, as well as the potential to change perceptions of insurance by moving away from an indemnity to protection focused model, IoT-based InsurTechs have a promising future and have attracted significant backing from investors.

IV. Blockchain

Blockchain, by contrast, has yet to feature in significant numbers of InsurTech propositions. Only 3% of applicants to Startupbootcamp this year employ blockchain as their primary technology – half the proportion seen in 2016. This might be considered surprising but despite the hype surrounding distributed ledger technologies and the undoubted potential for their use in insurance, the industry is so far adopting a ‘wait and see’ approach. This is because, in the main, they are unsure where it can provide differentiated value. Blockchain is still a new technology to many and more time is needed for it to be fully understood and explored.

This is not to suggest, however, that blockchain does not have a bright future. The recent proof-of-concept (PoC) completed by PwC for Lloyd’s of London is one example of the application of distributed ledger technology– a more widespread breakthrough may simply be yet to come.