We’ve just said farewell to an exciting 2015. This past year, insurance tech has made a significant progress moving forward in reinventing the technology that powers the insurance market place. Today, more than ever before, the word “startup” and insurance can be put together in one sentence and the visibility is rapidly increasing with many notable insurance tech accelerating the presence by gaining visibility and acquiring strong funding support in Venture Capital.
In 2015, this trend has been displayed in emerging startups in insurance receiving $1.78 billion in funding, 5 times the investment of 2014, according to CB Insights. This is tremendously impressive progress for the industry. So, what should we expect in 2016? Which insurance technologies will make the most progress next year?
The industry continues to innovate with Drones in accordance with recent FAA regulations. The barriers to entry for new Drone startups to the market primarily consist of licensing and acquiring piloting skills. Hence, there has been a large increase in new organizations formed to deliver this technology.
The technology has been perfected to the highest quality and delivers a lot of value, however the price factor for each drone assignment and the distribution and nation-wide coverage continue to be a challenge in insurance. To schedule a drone flight for insurance investigation or assessment requires scheduling and hence encounters natural travel and coordination delays. Therefore, the drones still remain impractical for daily “blue-sky” claims and deliver most value in claims that cover large territories, such as crop claims and CAT events.
We will continue seeing drones deliver more business capabilities in 2016 by applying Uber-like networks to improve the turn-around times to dispatch pilots for assignments. However, the demand will be likely be smooth and gradual in 2016, as the price point for a single assignment will be competing with a roofing contractor willing to climb the roof to assess the damage and satellite imagery.
The Internet of Things has gained a lot of ground this year through significant investments pouring into this market, especially after a report surfaced in 2014 projecting the IoT revenue to reach $7.1 trillion dollars by 2020. Latest projections by Cisco predict to double earlier projection of IoT market to be at $14.4 trillion revenue by 2022. Every single large player like IBM, Google, Microsoft, and others already made a giant leap to target this space.
This is very exciting, however it is not yet clear the extent or the ways IoT will impact insurance. Though we continue to see success stories in usage based insurance in private passenger vehicles and fleet management where IoT is built into the very business model, there is still a lot that needs to be done in facilitating adoption within the connected home.
IoT devices collect a lot of information and it is still difficult to come up with the final answer what specific data is necessary and which devices will serve a greater purpose. From connected smoke alarms to water pressure meters, electric meters, smart HVAC thermostats, connected doorbells and many others there is just way too much data. Similarly, the industry needs to make more progress in better understanding the data to derive human behavioral trends to identify impacts to risks and correlating the risks to calculation of premium costs.
The main question is still monetization. IoT is rapidly being adopted in areas that may have an immediate impact in driving revenue. Can data acquired through IoT impact revenue generation in insurance? Or is IoT more suitable to identify risks and areas of leakage?
Until the industry can answer these questions, IoT will continue to be a big area of interest in insurance, but will likely continue a smooth progression as it is adopted for specific business scenarios.
Looking at the investments in insurance, the top startups gaining traction in 2015 have been on the customer experience side. This ranges from areas of revenue generation such as agency support solutions and insurance market places for customer acquisition to solutions for improving customer service interaction in billing, payments, and claim handling.
This is the hottest area in insurance, especially as customer behaviors reached the tipping point to demand electronic centricity, rich online capabilities, mobile and omni-channel accessibility, and quality customer experience.
In 2016, we will be observing rapid acceleration in this area with customer acquisition solutions leading the pack with new improved rate comparison shopping solutions and policy application process, followed by technologies to improve customer support like omni-channel communication and remote video claims processing solutions.