If you haven’t read our first article; Insurtech Part 1 – What is Insurtech and Reason of Growth. We highly recommend to read that first before reading part 2; Insurtech Part 2: How Insurtech is reshaping the global insurance market
For knowing how the startups are changing the global insurance market and are on a way to disrupt the traditional insurance industry, we will have to look at the following 2 case studies of Lemonade and Metromile. These will help us ponder how they are structurally, functionally and radically different from the old insurance industry and way better and advanced and capable of reshaping the industry. This is Insurtech Part 2: How Insuretech is reshaping the global insurance market
- Lemonade insurance company was launched by the parent company lemonade incorporation on September 21, 2016 in New York City .
- It is an American Property and Casualty Insurance Company offering rental and home insurance policies for homes, apartments, and cooperatives.
- Lemonade’s business model differs from the traditional insurance model. It keeps flat 20% of all the premium inflows as profit and rest 80% is used to pay the claim, for charges associated with the processing of policy and for payment to the reinsurer to protect the organization against severe losses.
- Under the company’s GIVEBACK policy, the unclaimed amount goes to non-profitorganizations of the customer’s choice annually. However, this giveback feature is not guaranteed and is only paid in case the pool receives an excess of premiums over claims. However, if claim exceeds then reinsurer is there to take care of the group’s claims.
- It uses artificial intelligence and chatbots (artificially designed customer services robots to reply to customer’s messages, queries over the discussion forums) to provide insurance policies and handle claims. Policyholders file a claim with lemonade app whose AI robot reviews the circumstances and decides whether or not to approve the claim.
- In 2016, a man filed a claim for a stolen coat on the app and the AI technology set a world record by asking a few questions from the claimant and paying the claim amount in just three seconds.
- Lemonade is registered as a public benefit organization and it states that it has a motive to transform insurance from a necessary evil to social good.
- It promises zero deductibles, zero rate hikes and an instant switch to lemonade insurance options.
- The new and innovative design of the website displays how many people have switched to Lemonade insurance policy from their traditional insurance policies.
- Metromile is a san Francisco based startup that offers pay per mile insurance and a driving app for car insurance.
- Pay per mile is a usage-based insurance model where the user pays a base rate along with a fixed rate per mile. It ignores driving style or behavior and intends to benefit low mileage drivers.
- The pulse device provided records with the trip history and car health.
- It is a tech innovative startup that has revolutionized the car insurance industry and is one of the top Insurtech companies that have driven the insurance market towards them.
By the above two case studies of Lemonade and Metromile, we see how the new innovations have the potential to disrupt the traditional insurance markets. And it is certain that this fear has led the insurers to invest in these new startups as a part of their strategic financial planning so that they become a stakeholder in the progress of this new industry.
The combination of insurance with social sector and the Artificial intelligence sector offers a wide new bucket of goodies to the policyholders.
The lesser the time in claim processing , the happier is the policyholder and more is the inflow of premiums from their side.
The mobile technology and applications have enabled the industry giants to reach a wider audience and this is a positive sign for emerging markets which have a low insurance penetration and a large audience which can be targeted according to their needs.
Use of artificial intelligence, robo-advice and algorithms to provide insurance and for claim assessment cuts time taken for various processes during each stage of buying a life insurance policy.
The insurance industry is all set to be driven by innovation and technology , be it , features such as customized insurance products , social benefit embedded contributions or new phase of recording user data by devices such as techno-wrist bands to observe movement and exercise pattern of insured or internet-enabled devices and applications to sense driving patterns so that premiums can be priced as per observed behavior.
Coming up next: InsurTech Part3: Emerging Insurtech models and technologies in India