Fintech Finance presents: The Insurtech Magazine Issue 10 by Fintech Finance

ISSUE#10

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THE LEGACY INSURERS REDEFINING THEIR ROLES

CO V E R F E AT U R E

SURE THING!

WHY NOTHING’S BEYOND QUESTION AT ESURE HIDDEN BENEFITS

UNLOCKING THE BIG OPPORTUNITY IN EMBEDDED INSURANCE AI SPY A FRAUD

HOW COVÉA IS BUILDING TRUST IN THE TECH

Insurers expect the unexpected… but when it comes to claims payment processing, they need certainty, says Vitesse PSP’s Phillip McGriskin

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CONTENTS

THEINSURTECHVIEW Ada Lovelace had a prodigious mind for maths and science.

4 Fixing the future In a volatile world, customers want more certainty around insurance payments, says Vitesse PSP’s Phillip McGriskin and Dan Andrews

7 Playing catch-up AutoRek’s Piers Williams believes transformation is coming to insurance– albeit slower than many would like

10 The leap of faith Embedded products were once seen as a threat to incumbent providers. Chubb is turning them into an industry-wide opportunity…

24 From purchase to payout Generali Group has ambitious growth and transformation plans – we look at what they mean for the business, its customers and the wider sector

28 Question time ‘Transformation’ isn’t a buzzword at esure – it’s a mission statement. It wants to transform itself – and the entire insurance ecosystem, as James Russell explains

12 A meeting of minds … and the synergy between Chubb and Revolut has made for a powerful embedded partnership

31 Driving change Hastings Direct has transformed its internal processes, using automation and AI. CIO Sasha Jory unpacks the strategy

14 Making the case for AI We explore how AI is changing roles in the industry for the better with Instabase

34 It’s not just a numbers game How accounting software company Aptitude is focussed on supporting the rapidly changing office of the insurance CFO

17 Weeding out fraud Economic hardship is fertile ground for scammers; AI can help combat some concerning trends, says Covéa

20 A good awakening

36 Way to go for Norway’s next gen Most of his peers think travel insurance is ‘unsexy’ and hard to do, but Kvikk’s Torstein Sandaa-Johansen is determined to change that mindset

Insurers now recognise that embedded products are a great route to market… but iptiQ says it’s not always an easy customer journey,

22 Optimising the claims process

40 As quick as a flash

As false insurance claims soar, insurers are employing tools like Clearspeed to trust decisions faster

FloodFlash CEO and Co-founder Adam Rimmer explains why speed is vital for SMEs on the brink

As many of you will know, she’s considered the first computer programmer – she wrote the algorithm for Charles Babbage’s ‘Analytical Engine’ in 1843, and, much later, the programming language ADA was named after her. Why am I mentioning Ada now? Well, the world has just celebrated Ada Lovelace Day (October 10), an annual opportunity to talk up the opportunities for women in STEM careers… it’s a shame that we still have to. According to various surveys, including the World Economic Forum’s, women make up 15-22 per cent of AI and data professionals. Ada wasn’t given the recognition she deserved in her lifetime, but it’s been 180 years since she wrote the first program; you’d think we’d have made more progress than that. I would dearly have loved to feature a host of modern-day Adas on our front cover. In fact, we try very hard to seek out women across financial technology for interviews. But in eight years, we’ve only succeeded in achieving parity between the sexes in one edition. There’s another reason for calling Ada to mind in this issue. The Ada Lovelace Institute, which works to ensure everyone enjoys the benefits and privileges generated by data and AI, has called for more robust governance of foundation models. Several interviewees in this issue, conscious of the huge amount of personal data that insurers have access to, are hesitant, too – about LLMs specifically. I wish I knew what Ada thought. I’d like to know what contemporary ‘Adas’ think even more... Sue Scott, Editor Last issue’s spine tingler, 'The most valuable commodity I know of is information’ is from Gordon Geko in the movie Wall Street

THEINSURTECHMAGAZINE2023 EXECUTIVE EDITOR Ali Paterson

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PHOTOGRAPHER Jordan Drew

EDITOR Sue Scott

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Issue 10 | TheInsurtechMagazine

PAYMENTS & LIQUIDITY

FIXINGTHEFUTURE

In a volatile world, customers want more certainty around insurance. Vitesse PSP’s Phillip McGriskin and Dan Andrews discuss how innovation has both sped up claims settlement and improved consumer confidence Certainty is increasingly important for consumers in a world facing major challenges, but insurers have struggled to keep up with the technological innovations that would help deliver it and which have revolutionised other financial services. Until now. Buying insurance generally falls into the category of ‘boring but important,’ be it for a property, a treasured possession or a significant event, both as an individual or as a business. But when something goes wrong, it is invaluable – which is what makes it so vital for many people’s peace of mind. “There’s not very much that happens in the world without insurance playing a part,” says Vitesse PSP CEO and founder Phillip McGriskin. “Whether it’s goods coming from one side of the world to the other, which need to be insured on their crossing, the production of those goods, or where and how they are stored in a shop, and then how we get them home – all of it is covered by insurance.” However, the problem with selling insurance is that you’re asking customers to pay for something that they, hopefully, never have to use and, if they do, it’s usually under extremely negative

circumstances. Insurance has also been the laggard when it comes to technology, so the customer experience has historically been quite painful – especially when it comes to payments. It’s here that Vitesse PSP’s services come into play. “Vitesse PSP is a payment service provider to the insurance market. We provide global disbursement solutions and our clients leverage a variety of payment methods to settle claims around the globe,” explains the company’s insurance director, Dan Andrews. “We also have a treasury liquidity management solution to help our clients manage liquidity within our platform.” The UK-regulated payments platform doesn’t work exclusively with insurers

but its funding and payment solution, Faster Claims Payment (FCP), has been highly praised by the insurance industry for solving one of its biggest challenges – namely, settlement times. Indeed, in July it was named Claims Initiative of the Year at the British Insurance Awards. Developed with leading names in the British insurance market and delivered by market operator Lloyd’s of London, FCP enables fast and direct payment of a claim to a policyholder. It does this by decoupling the payment of claims from the monthly bordereaux and loss fund top-up process, instead facilitating direct access to insurer funds, via Vitesse PSP’s payment platform – thereby decreasing any delay in payment to the customer. The paytech can also release funds in local currencies, improving the claims experience in what are often additionally stressful circumstances. Because, let’s face it, making an insurance claim is often an emotional issue for policyholders at the best of times, let alone when they’re abroad. “So it’s critical we get cash to them as quickly as possible, whether that’s to get their business up and running, or to repair damage to a residential or commercial property,” says Andrews.

Predict and prevent: Parametrics is changing insurance as we know it

TheInsurtechMagazine | Issue 10

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Parametric insurance has been invaluable in helping to provide real-time settlement and support, because it pays out a pre-specified amount, triggered by the magnitude of certain events, such as a major storm, rather than assessing the losses actually incurred. “Parametric insurance is all about settling as quickly as possible, post-event,” explains Andrews. “So insurers need to make sure that they have a payment provider, be it a bank or a PSP [payment service provider], such as ourselves, that can really deliver seamless, straight-through, real-time payments to the policyholder.”

A DIFFERENT METRIC One of Vitesse’s parametric partners is London-based commercial flood insurance provider FloodFlash, which pays out once flood water reaches a certain level. Customers can select what that level is and a settlement amount when taking out the policy. The company then installs a unit on the outside of a property. In the event of a flood, it knows the scale and settles the claim accordingly.

With covers like parametrics operating on a real-time basis, it becomes all about how you keep the funds flowing Phillip McGriskin, CEO & Founder, Vitesse PSP

“After severe floods in the north of the UK a couple of years ago, we were able to send a payment on behalf of FloodFlash to one policyholder within four hours,” says Andrews. “Flooding is just one type of event, though,” he continues. “We also work with Yokahu, another incredibly innovative business that insures residential properties in the Caribbean. If a hurricane tears your roof off, for example, it uses a set of data to be able to determine the damage and payment. “We can leverage our network in the Caribbean to settle those payments as quickly as possible. You might have been put up in a sports hall or a hostel and if we can provide, alongside our clients, ffnews.com

the comfort of knowing, we’re going to deliver cash to get your property repaired as quickly as possible, that’s an incredibly powerful message. It becomes a real KPI for a lot of insurers.” Weather events are most commonly associated with parametric insurers but another of Vitesse PSP’s parametric partners is looking after the smaller things in life. Commercial parcel cover provider Anansi insures shipments with major couriers, while removing them from the claims process entirely. So, if a customer pays a premium for a parcel to be delivered, and it fails to arrive, a reimbursement is automatically triggered. “That process is automated through the shopping platform Shopify’s purchasing experience. It really helps build trust in the marketplace and gives confidence to the customer that they’re going to get their goods,” explains McGriskin. “It also helps the small business selling the product because they know that they’re protected all the way through the chain. So it’s a win-win. And because it’s all automated as much as it can be, it has a low-cost profile.” “Over the last couple of years, we’ve seen a huge demand for parametric insurance,” adds Andrews, “and some of the big players – in the Lloyd’s market, specifically – are providing far more capacity to parametric MGAs like FloodFlash, Yokahu, Redicova, K2, and many more. It’s incredibly important that trajectory continues, because, to my mind, it’s the only truly consumer-focussed insurance product on the market. “It’s leading the way when it comes to the optimal customer experience, and I think if the rest of the insurance market doesn’t innovate and evolve, it will get left behind.”

OPTIMISING LIQUIDITY While facilitating easier and quicker payments is a key benefit of insurers partnering with Vitesse PSP, McGriskin is keen to stress that it’s actually the treasury side of payments where the solution is having a profound impact on the insurance industry. “The primary driver [of the FCP project] has not been the end payment; it’s been the treasury,” he says. “We’ve been working, as a partner, with Lloyd’s of London and the banks

– who have the strength of their balance sheets, but don’t have the speed of the technology – to make sure we’re bringing through products that are really optimising the capital for the market while focussing on customer outcomes at the same time. “The industry, as a whole, has not been laser-focussed on payments,” adds McGriskin. “It’s been concentrating on risk first and then customer outcomes, which include payments. What we’re seeing now, because the liquidity is being optimised, is that it now does come down to that payments piece. “Because, with covers like parametrics that are operating on more of a real-time basis, it’s all about how you’re able to keep the funds flowing at the same pace. If you’re paying out claims in real time, and if you’re now doing it for a much wider market base, there’s more money involved, it’s moving around more rapidly, and you’ve got to be able to enable that.

Parametrics, to my mind, is the only truly consumer-focussed insurance product on the market Dan Andrews, Insurance Director, Vitesse PSP

“There aren’t many companies that can help with that treasury function as well as the payment function – making sure that the money to pay the claim is there when it’s needed, and also that the claim can be paid as efficiently as possible. So, this is one of the big areas where we’re helping the market focus.” McGriskin expects to see a lot more partnerships like the Vitesse PSP tie-up with Lloyd’s of London emerge within the insurance industry. “Our customers are seeing technology, payments and treasury services being used effectively elsewhere, and are trying to understand why it’s taking so long to get something done in the insurance vertical,” he says. “I think businesses and consumers are expecting to see more technology being used more efficiently, to make the transaction and the whole process smoother.” Issue 10 | TheInsurtechMagazine

AUTOMATION

Whilst other industries have sprinted towards automation, the insurance sector has been more of a tentative participant. AutoRek’s Piers Williams says that transformation is coming, albeit slower than many would like Without question, the insurance sector has lagged behind others in the financial services industry when it comes to automation. Most insiders readily acknowledge that they have much ground to make up, pointing to the as-yet-unfulfilled potential for technology to address core issues, such as improving efficiencies and reducing costs. However, recognising there’s a problem – or opportunity – is one thing, executing a plan to address it is entirely another. As Piers Williams, global sales manager at reconciliation software company AutoRek, says: “There are many insurance businesses out there sitting on large volumes of unallocated cash that struggle to reconcile effectively. This is due to a lack of granularity in their data.” In an information-rich sector such as insurance, it’s improved use of data that holds the key to unlocking efficiencies in day-to-day operations, says Williams, whilst also assisting with compliance and informing longer-term strategic decisions, as operations scale. AutoRek was founded in 1994 to ‘help firms get in control of their data to save time and costs through intelligent automation’. And it does that by providing clients with no-code reconciliation software with self-sufficiency at its core. ffnews.com

“Enabling self-sufficiency has been a priority of ours for a number of years now,” says Williams. “And it really comes down to allowing our business users to evolve their processes in line with ever-changing requirements. “Because business isn’t static, it’s constantly evolving.” AutoRek’s software is used by more than 100 businesses across the asset management, payments, banking and insurance sectors, and it has a wider application than the low-hanging fruit of simple document management.

The relationship between the insurance indusry and the wealth of data it sits on is frustrating. There’s no hiding that “The relationship between the insurance industry and the wealth of data it sits on is frustrating. There’s no hiding that,” says Williams. “There are a number of reasons for that frustration. These include having multiple different sources and formats of data, data quality issues, a lack of

confidence in that data, and different levels of detail across datasets. “Our solution is really flexible and can take data from any source and in any format. We go through a series of data transformations, validation, and enrichment operations. This gets the data into a state where we can process it as efficiently and effectively as possible, downstream. “Ultimately, it gives a business valuable insight into its performance and health through management information and reporting outputs.” According to Williams, there are five key areas in a traditional reconciliation process: data sourcing (gathering information from around a business, and also external sources); data transformation (working with that data and getting it into a state in which it can be processed); data matching (comparing two or more records and identifying the possibility of them belonging to the same entity); investigation (for example, looking into any breaks or queries); and, finally, reporting (creating information and recommendations for management). Challenges posed by multiple different sources and formats of data, quality issues, and a lack of confidence in the data, may take up to 50 per cent of a business’s time spent on reconciliations, says Williams. Issue 10 | TheInsurtechMagazine

AUTOMATION Matching could use up a further 20 per cent – implying there’s relatively little time to investigate, resolve items and provide reporting. But this formula changes dramatically when automation is brought into the mix, as AutoRek has demonstrated. “Of those five steps in a reconciliation process, our solution completely automates data sourcing and transformation,“ says Williams. “We would expect to get at least a 75 per cent match rate, too. So that workload, for users of our software, has largely disappeared.”

A BREAK FROM THE PAST Empowering clients to code their own software is sound business strategy, says Williams – for both parties. “Technical skills are in very short supply and in very high demand, which commands high salaries,” he says. “I think every client we talk to highlights the recruitment squeeze they’re feeling. So the no-code feature enabling client self-sufficiency is a key part of our solution. “It’s all part of being flexible to suit changing needs. If a user has a process that no longer works, they’ll likely stop using it. Obviously, that might lead to them not using our solution at all. “So, if they can make changes to keep them working efficiently and effectively, that benefits us, our client, and our relationship with them.” It is likely that many of those companies will have been using Excel for 10, 20, or even 30 years and have fully developed a skill set in the process. Indeed, a recent study by AutoRek showed that more than a third of respondents in the insurance industry still rely on spreadsheets for their reconciliations. AutoRek therefore employs a substantial amount of Excel-based logic in its solution, helping to build on the experience that clients already have. In short, firms can adapt to changing conditions, without having to ‘bring the experts in.’ As Williams says: “Some of the feedback we get from clients about other vendors is that they’re constantly hit with consultancy engagements after go-live for further changes. So, they never really get the full cost-benefit of automation. “If we can allow them to make those changes, we remove that burden entirely. We’re a software vendor, not

TheInsurtechMagazine | Issue 10

a consultancy, and we want to give clients the skills they need to be completely in control of their operations.” AutoRek’s intelligent data acquisition functionality allows it to onboard any kind of file-based data, including Excel. And, let’s be honest, despite its popularity, Excel does have its limitations. “I remember one particular client had an incredibly complex Excel-based macro,“ says Williams. “The person who created it had long since moved on. But the business was adamant the macro was correct and they needed it for core business calculations.

In the driving seat: Clients are empowered to make their own changes to the software

AutoRek has an inbuilt optical character recognition (OCR) capability that allows it to overcome some of the challenges associated with PDFs. "We also have more automated mechanisms, such as APIs and webhooks, which are powerful when we’re looking to work with external payment providers, for instance,” he says. “Database connection, SQL Server, OLEDB, ODBC drivers can also be easily utilised. We already have a mailbox integrator and are looking at Teams integrators for the future.” Across the many sectors in which AutoRek is active, the largest organisations tend to reap the most value from its solution, says Williams. That’s because they typically have higher volumes of data, will often have more complex business structures (such as multiple entities across multiple countries), and provide a greater number/variety of products, often through third parties. But the exception to that rule is insurance, where smaller insurtechs find AutoRek’s solution just as helpful, says Williams. “That’s because those businesses are often looking to build very scalable architecture that can grow limitlessly, no matter how big they become.” Large or small, everyone in insurance wants to mitigate financial and operational risk. And AutoRek is essentially a financial control solution that allows users to monitor data throughout its lifecycle. A full audit trail is maintained on a transactional level, including any automated or manual action that’s applied, with date and time stamps. In 2021, McKinsey Research forecast that, by 2030, more than half of current insurance claims activities could be replaced by automation. Given this process is likely to accelerate over the next seven years as AI continues to develop, the race to win better efficiencies and cost savings is well underway. And AutoRek is determined to be leading that field.

We're a software vendor, not a consultancy. We want to give clients the skills they need to be completely in control of their operations

“We had to unpick exactly what was going on with it and when we replicated it in AutoRek, the results were found to be wrong. So, we went back to the business and asked what they were looking to achieve and they couldn’t really answer the question. “We realised that the process wasn’t right and the output they had been relying on probably wasn’t what they needed, either. “We find those issues that are challenges for clients, that perhaps they hadn’t even realised were there.” The insurance industry has a particularly wide range of data sources and formats in which that data is presented. One of the key issues for Williams here is PDFs.

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INCUMBENTS

THE

LEAPOFFAITH

Chubb was one of the first insurers to recognise the power of embedded insurance, Global Head of Digital Business Sean Ringsted explains how it’s turning what was once seen as a threat to incumbent providers into an industry-wide opportunity The world’s largest publicly traded property and casualty insurer broke new ground in 2020 with the launch of Chubb Studio, a global integration platform that provides the architecture for non-insurers to give their customers access to embedded insurance products – and not necessarily all of them Chubb’s own. Was it a massive own goal or a brave and visionary step? Three years on, and with more than 200 partners – including some of the world’s biggest and most demanding digital companies – signed up, Chubb’s answer to the ‘threat’ posed to incumbents by embedded insurance is definitely looking more like the latter. While most embedded insurance thus far has been distributed through insurtech orchestrators, not directly by the carriers, Chubb, has, in effect, turned competition to its advantage – by taking a pole position on the route over which an increasing amount of insurance traffic is predicted to flow. InsTech recently forecast that embedded insurance will grow six-fold to US $722 billion (£607billion) in gross written premiums (GWP) by the end of this decade. And, unlike the vast majority of embedded insurance providers, Chubb can also leverage its decades-long experience in the sector to create seamless, bespoke journeys for its partners’ customers. “Our partners are leading digital organisations, so you have to be able to integrate in their native app to deliver products and services,” says Ringsted. “Chubb Studio gets us in the door.”

TheInsurtechMagazine | Issue 10

Once there, though, the real value generation comes from working together to build the best-ever end-to-end customer journey. “Take the example of a banking app. You can sort out the tech pretty quickly, but the experience runtime could take a bank six to nine months,” says Ringsted. “They spend forever – and rightly so – developing those customer journeys, so where and how you intersect with the insurance has to be spot on. It can’t be intrusive or disruptive.”

PROTECTING THE FUTURE Among Chubb Studio’s successful partnerships are challenger banks Revolut in the UK and Nubank in Brazil – both of which have built their reputation on famously smooth UI and CX. “With Nubank, we’ve delivered a life insurance proposition to its customers, which is based on three simple questions, and it’s been extraordinarily successful,” continues Ringsted.

Digital has broken down boundaries in terms of how companies come together to operate, deliver and provide value “In Brazil, we are providing a financial protection product to hundreds of thousands of people who didn’t have access to that type of protection before.“ That neatly illustrates how embedded insurance can help incumbents address the global protection gap, which some estimates put at US $1.4trillion, a two-fold increase since 2000. It also

demonstrates that insurance doesn’t have to be a ‘grudge purchase’, and can appeal to digital native Millennials and Gen Zs, who will soon make up the majority of economically active adults in an increasingly digitised world. “We’re working with mobile network operators, providing protection for cell phone/gadget loss or damage and with payment providers,” says Ringsted. “If you’re serving low-income geographies and countries, and if your customer is sick and can’t work, that’s meaningful. We can help them protect loans, payments, bills. “In the ride hailing sector, we are providing more of an experience combined with protection. If your trip is late, we’ll give you cash, or make payment direct into your digital wallet. We’re working in the travel industry with airlines, on trip cancellations, lost baggage, and so on. “To be able to work in that wide range of verticals comes back to our ability to integrate through technology and Chubb Studio. And, again, what’s important is that it’s not a commodity. We sit down with partners, and work hard to make sure we’re delivering to their customers the experience that the partners demand.” That quest led to the introduction in late 2022 of three new Studio features. First, access has been given to Chubb-developed software development kits (SDKs) that enable its partners to embed products and services natively within their apps. Second, there is now the option to add products and services from other insurance carriers. The upgrade also means all Chubb’s distribution partners have access to Blink By Chubb, its online-only insurance cover, which previously was only available to US ffnews.com

The digital athlete: Chubb is showing that mature players can be agile, too

customers. Taken together, this latest iteration of the Chubb Studio means a significant upgrade in service, says Ringsted, starting with the freedom to customise the software, offered by SDKs. “APIs are fantastic, but they require a certain amount of work for partners to be able to integrate,” he says. “And, today, engineering resource is really precious and valuable, and our partners have other priorities than insurance. “The SDK is a concept that’s widely used, but we took our set of APIs, and put those into software development kits, which allows partner engineers to integrate very rapidly into their digital real estate. It cuts the cycle times down for our partners. “I think the second new feature is really interesting and hasn’t fully played out yet – where partners want to be able to access a service that Chubb may not have. They may want to access a different product, that we don’t have the appetite or the capabilities to provide, but we’re nevertheless able to take that third-party service or product, and deliver it through Chubb Studio. “It means Chubb Studio is not just orchestrating Chubb’s products and services and APIs now. But the advantage of that, for the partner, is they continue to have a single technology integration platform – all they see is Chubb and we’re very excited about that proposition of becoming a multi-carrier, multi-service platform. “The third feature, Blink By Chubb, is what we call the experience layer. We focus a lot on technology, which is necessary but not sufficient, as I say. You’ve got to build that experience layer on top. So, we’ve now enabled a Blink experience layer through Studio, which is all about making sure that it ffnews.com

goes end-to-end, seamlessly, from a digital point of view. “With Blink, we’re delivering and explaining to the customer a product proposition in clear, simple language that they can understand. Their service and claim points are digitally integrated, if that’s what the customer wants to choose. If they still wish to call us, that’s OK, but the default option is for them to interact digitally. “We continue to invest and expand the tech capabilities of Chubb Studio, with a focus on creating not only a market-leading CX, but also a superior partner experience (PX) for developers – there’s a lot more to come.”

POWERED BY PARTNERSHIPS Ringsted believes that the continued development of an ecosystem of partnerships will provide the best route map for the future of insurance. “Digital has broken down a lot of boundaries in terms of how companies come together to operate, deliver, and

provide value,” he says. “I think, increasingly, insurance will be built around a value proposition rather than cash – ‘sorry your car had an accident. Here’s £1,000’ – and, if that’s the case, it’s going to need value-added services and different players to come in. So, you start to see how ecosystems can form, where you’ve players in banking, or in travel, for example, needing these adjacent services – because, today, whatever vertical you’re in, insurance has never been more relevant.” He’s proud of what Chubb Studio has achieved over the past three years. “Studio was born during the height of COVID, and people were in lockdown, in their homes, and somehow we built this. There’s been a lot of hard work, a lot of hard lessons learned along the way. But it’s just a great team,” he says. “And we’ve benefitted incredibly from the range of partner experiences we’ve had, too. We’ve been able to draw upon all those, put them in this technology crucible and forge Studio. “We’re humble about it. We continue to learn – things break, you have to rebuild, create, and just keep innovating. But, again, while the technology is important, it’s a means to an end. It’s all about delivering that value proposition to our partners.” Issue 10 | TheInsurtechMagazine

PARTNERSHIPS When collaboration occurs between a global insurer on a mission to shake up the industry and a fintech with a ruthless ambition to be the ‘Amazon of banking’, you can be sure that traditional thinking will be swept aside. So it is with the partnership formed between Chubb and Revolut, in which the insurer provides embedded products for the neobank’s swelling ranks of customers. Balázs Gáti, global head of insurance at digital banking app Revolut, says the relationship is a vital cog in his company’s quest to develop a financial super app for its customers. “Our mission is to simplify all things money, and we strongly believe that one cannot build a comprehensive financial super app without offering insurance propositions,” Gáti explains. “So our vision, as the insurance team, is to build an insurance one-stop shop for our customers, offering different policies on one platform. “We have standalone insurance propositions, such as pet insurance, in the UK. And then we have embedded insurance propositions.” So far, customers on its paid plans – Plus, Premium, or Metal – benefit from purchase protection, refund protection, and ticket cancellation as part of their account package. “They have protection by default,” says Gáti, “which is a great opportunity for us to close the insurance protection gap. And they receive these benefits at a very favourable price.” Since it was formed in 2015, Revolut has become the UK’s most valuable fintech, worth £28billion, with more than 205 million users worldwide. When it comes to insurance, it acts as a managing general agent (MGA). “So, we are a distributor, and it’s super important for

us to find insurance partners and carriers who are able to work with us to bring new embedded and standalone insurance propositions to market,” says Gáti. For Chubb, the world’s largest publicly traded property and casualty insurer, this is much more than a traditional affinity sales programme: it’s about developing a product and a way of delivering it together with Revolut, using the insurer’s flagship digital distribution proposition, Chubb Studio. Sean Ringsted, global head of digital business at Chubb, says their partnership will ‘raise the bar’ for customer experience in insurance. “We’re taking risk in an environment where a lot of people are shying away from it,” he says. “We have a real value proposition to bring and a real role to play in a super app like Revolut because there are so many different touchpoints where we can help Revolut’s customers. “I think of insurance as being not just a financial transaction where, if something happens to you, we pay,” continues Ringsted. “It’s much more than that. We can help you prevent risk,

or help you to think about risk. And not in an intrusive way but at the right place and the right time.” Gáti agrees, but he says that the wider insurance industry must address some ‘key customer pain points’ if embedded products are to work seamlessly. “Insurance players and insurtechs not only need to strive for instantaneous claims settlement and decisioning,” Gáti says. “Customers demand a 10x improvement in experience in other journeys, as well – including onboarding, policy servicing and support. Partnerships need to find solutions to address these customer pain points.” Fundamental to that is explaining the value proposition to customers. “Any additional service that has a lower-than-expected value to the customer can break trust with the provider,“ says Gáti. “So, it’s super important that they are able to evaluate the value-add of these additional services, and, to be honest, to date, I have not seen many affordable solutions that work reliably at scale.”

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CONSUMER-FOCUSSED Rising to the neobank’s relentless pursuit of perfection in CX demands a new way of thinking and working, admits Ringsted. “Revolut’s app experience is best-in-class and, for me, that’s what’s been so energising,” he says. “We’re able to integrate on a technology level, but that’s not sufficient because we don’t want to disrupt Revolut’s customer experience. Every pixel on that app is so important that we want to respect that digital real estate, and work our products and services into it. Everything else in ‘the plumbing’ behind it has to work, too, so it’s pretty holistic.” Cloud, APIs and mobile technology are key to the successful delivery of embedded services. “Cloud provides the ability to compute and store data at scale, while APIs are the bedrock of the technology integration between Chubb and Revolut,” says Ringsted. “It’s how we talk together, and it’s how we are all going to stitch together these ecosystems. “Also, it sounds simple and it’s often overlooked, but it’s all about the phone. If you can’t

deliver your value proposition through a phone, then it’s much harder to be relevant. “In a digital context, we have the ability now to deliver a customer experience so they go, ‘oh, that was easy. I didn’t have to call anybody, or walk down the high street to see an agent.’ Or, ‘I feel better for having protected the loan that I took out for my business, or my trip from an event cancellation, or if I get sick.’ “The opportunity has never been greater for us to deliver that peace of mind and value simply and effortlessly.” So how does Revolut see its partnership with Chubb evolving? Gáti believes that challengers still have ‘a long journey’ in building reputation and trust with customers when it comes to selling them insurance. But his own neobank has a strong foundation to build on. “Our customers love the Revolut UX and UI, which is very simple to understand and navigate. It’s very intuitive,” he says. “They also appreciate the benefits and the value that come from an embedded ecosystem, the fact that they can conveniently switch between different financial services and get insurance in a couple of clicks. “What we see is that, as long as the pricing is competitive,

and the proposition is differentiated, our customers love buying policies on the Revolut ecosystem.” Aligning itself to the neobank’s ethos means ‘we have to be creative, we have to be collaborative, to deliver the experience that Revolut creates,’ says Ringsted. “We’re thinking all the time ‘how can we help Revolut succeed? How can we provide a value proposition to the partners?’. That forces us, when we go back to our product people, or our technology people, to say ‘the bar is here’ because there is such a high expectation around performance – [to avoid] the moment that something doesn’t work, you get the little wheel

Our vision is to build an insurance one-stop shop for our customers, to enable us to offer all different policies on one single platform Balázs Gáti, Revolut

spinning, or can’t enter your credit card information. We’re really happy to try and hit that bar with them, but we have to think differently. I love this partnership, because of that desire to be the absolute best.” Revolut continues its relentless global expansion in both its reach and range of services. The fintech has more than 50 products, ranging from debit cards and bank accounts to crypto trading and a shopping app, called Revolut Shops, in Ireland. Gáti emphasises the value of its continuing work with Chubb. “The Chubb team is very committed to innovating on customer-centric propositions. And they also have the tech layers and the tech capabilities, to support us in pan-European, or even global product rollouts, which is really important for us, as we are a global brand,” he says. “I’m looking forward to launching many more successful products with them.”

The synergy between Chubb and Revolut has made for a powerful partnership that enables customer-centric solutions, says Sean Ringsted and Balázs Gáti ffnews.com

Issue 10 | TheInsurtechMagazine

CHANGING ROLES By 2030, underwriting as we know it will have ceased to exist for most lines of insurance, reduced to a matter of seconds by automation, with machine and deep-learning models built within the technology stack. More than half of claims activities won’t be touched by a human hand. Instead, a neural network of connected devices will handle everything from first notice of loss to settlement. And pricing will be available to customers in real time, as their behaviours and needs change, based on their usage and a dynamic, data-rich assessment of risk. Insurance will be embedded into every aspect of our professional and domestic lives, informing choices and effortlessly making good our misfortunes and mistakes. That’s one vision of the industry at the turn of the next decade, as imagined by McKinsey. But the truth is, the technology exists to realise all of those things today and it’s companies like Instabase that are providing the artificial intelligence to achieve it. According to Instabase’s head of insurance, Bastiaan de Goei, its

deep-learning and large language models (LLMs), and low-code tools can already ‘reduce the manual effort associated with claims processing by up to 83 per cent’. It does this by unlocking unstructured data, which exists everywhere across insurance, and extracting, digitising and validating that information to enable the automation of mission-critical processes. As de Goei explains it, a typical casualty claims process might involve an injury document, a medical record, and a description of what happened. “Human effort is required to understand, interpret, and subsequently action anything related to that claim,” he says. “Instabase applies deep-learning and LLMs to understand that incoming information as if it were a human.” The resulting reduction in manual effort and the streamlining of processes promises wide-ranging benefits for clients, but potentially has even more of an impact on the organisations that deliver them and the individuals who work within them. “Even over the last 24 months, the application of deep-learning model and LLMs has allowed us to do so much more with highly complex and varied documents, and other types of information and data that exist inside

an insurance organisation,” de Goei says. “For the first time, technology can help the underwriter and the claims adjuster in their work, dramatically reducing or even eliminating the more mundane, data entry and simple processing type of tasks that humans ordinarily do.” While we’ve not quite arrived at McKinsey’s 2030 vision yet, de Goei provides compelling real-world examples of how these tools are already being applied. For example, a short-term disability claim, a big product in the US, involves multiple types of documents, and the average pay-out time for a claim is up to two months. ”Imagine if you have to [pay] one or two months of mortgage payments, and other regular bills. That’s painful for the end customer,” says de Goei. “Working with Instabase, one particular life insurer was able to reduce the claim cycle time from two months to two days.” Using the short-term disability claim as an example, de Goei explains how the insurance industry also has an opportunity to use existing data that has been unlocked by companies like Instabase, to improve understanding of not just current claims, but claims going forward, too. “Data can be used to understand whether that claim is going to develop

Bastiaan de Goei, Head of Insurance at Instabase, which combines deep learning and LLMs with low-code tools, explores how AI is changing roles in the industry for the better 14

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into a long-term disability claim,” he says. “Our client’s data science teams use that same rich data to do predictive modelling that they couldn’t do before, because they didn’t have access to the data that sits inside those claims documents.” Those teams can now intervene on a short-term disability claim that bears characteristics suggesting that it will turn into a long-term disability claim, and make recommendations to that customer on taking action to prevent it. “Alternatively, the insurer can be ready for when that happens, and make sure they can pay out,” says de Goei. It’s evidence of the transition from an era of ‘detect and repair’ to ‘predict and prevent’, which promises to transform every aspect of the industry. Whether or not customers – and regulators – are ready for it is another matter. But de Goei’s convinced that consumers will like the outcomes, which go well beyond the slick, but limited apps that many insurance companies will have used to onboard them. “An insurance company might tell a customer to take a picture of their driver’s licence or passport, as part of a KYC process in order to process a claim. But, in the background, those pictures and that information are still processed manually,” he says. “So, in the end, although you have an app experience, it still takes a couple of days before the insurance company comes back to you.” Using background AI, Instabase can help an insurer understand those documents, in a similar way to a human, and detect errors, omissions, or changes, and even fraud, adds de Goei. “What that means for the customer is they’ll be prompted if something is missing straight away, and the claim can begin to be processed. Making validation, data extraction and checking for fraud easy for the agent, starts making the customer experience a lot easier, too.”

HOW ROLES ARE CHANGING Such AI assistance in the back office is going to reduce certain multi-step processes, says de Goei. Take a typical large claim that has already been thoroughly investigated on site; it will then pass through multiple desk-based positions before a resolution is sought. ffnews.com

“Instabase can play a role in the evaluation of that information from the contractor or field adjuster, extract the claims amount estimate, as well as the liability decision, so that the desk-based loss adjuster’s job can, by and large, be automated. Rather than having multiple steps of evaluation, it goes straight towards a payment system.” This goes way beyond simply replacing data entry and potentially changes the nature of the job. Is that a bad thing? Maybe not. De Goei cites another report by McKinsey from 2019 when it estimated that up to 40 per cent of an underwriter’s time was spent on routine tasks. “New underwriters coming into the market are asking the insurance company, ‘what type of automation solutions do you have in place, because I do not want to spend half my time on stuff that is not of interest to me. I want to be focussing on underwriting’,” the authors said.

A company might tell a customer to take a picture of their driver’s licence or passport as part of a KYC process. But, in the background, that information is still processed manually In a poll conducted this year by global insurance stock index ACORD among insurance professionals, asking about their perspectives on the future of the industry, 50 per cent said they anticipate that their greatest long-term source of competitive advantage will be the way in which they leverage technological capabilities. Auto insurers, such as Europe’s Covéa, in particular have shown leadership in this space. A survey from the National Association of Insurance Commissioners in the US revealed that 88 per cent of the 193 respondents in that vertical indicated that they currently use, plan to use, or plan to explore using AI/machine learning in insurance practice. Most saw it being deployed in claims, followed by marketing and fraud detection, with only a minority using AI/ML for underwriting, rating and loss prevention. All this will inevitably have an impact on the workforce. Traditionally skilled

teams and talent are still essential, but the requirements of key roles are changing. Underwriters may not become programmers, but they will have to work closely with an increasing number of data scientists in the industry on underwriting solutions. Which is why it’s important that low-code tools like Instabase’s are easily accessible and deliver data that’s clearly understandable to existing staff.

AI A ‘KEY COMPETANCY’ The ACORD survey noted that technology was seen as ‘the most critical capability/competency for the C-suite by 2040’, too. ACORD CEO Bill Pieroni said: “The need for human talent and expertise in our industry cannot be overstated. However, we will see the focus shift toward familiarity and proficiency with emerging tech capabilities. Industry professionals with this skill set will continue to drive innovation and advancement across the ecosystem.” McKinsey also stressed the need for insurers to create the right talent and technology infrastructure over the next few years. “Generating value from the AI use cases of the future will require carriers to integrate skills, technology, and insights from around the organisation to deliver unique, holistic customer experiences,” it said in its 2030 vision document. “Doing so will require a conscious culture shift for most carriers that will rely on buy-in and leadership from the executive suite.” It pointed out that while ‘the tectonic shifts in the industry will be tech-focussed, addressing them is not the domain of the IT team. Instead, board members and customer-experience teams should invest the time and resources to build a deep understanding of these AI-related technologies’. “No one thing ever is the key,” concludes de Goei. “What Instabase – and other types of AI companies – are really enabling insurance companies to do is to truly focus on those things that require an art, rather than the ability to do data entry. “At the end of the day, it’s the whole organisation that has to come together, in order to enable extremely good customer experiences. Applied correctly, AI can be a great help with that.” Issue 10 | TheInsurtechMagazine

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ARTIFICIAL INTELLIGENCE

WEEDING OUT FRAUD Covéa’s Tom Clay says that while economic hardship provides fertile ground for insurance scammers, the use of AI can help combat some concerning trends

Economically difficult times inevitably influence the number of individuals who turn to fraud and the ‘victimless’ crime of fleecing an insurance company spikes. In Sweden, the industry estimated that scams accounted for between five to 10 per cent of the SEK 70billion (£5.1billion) paid out to non-life claims in 2022. The Coalition Against Insurance Frauds in the United States, meanwhile, calculated that fraudulent claims have increased there by 285.75 per cent since 1995 and cost an eye-watering $308.6billion annually. In the UK, insurers believe they’ve been losing upwards of £1.2billion per year since 2019, and that identified fraud only accounts for a third of total cases. But since inflation started rising and the cost-of-living crisis took hold those statistics have shot up – by 66 per cent since March 2022. This is a jump so significant that the City of London police launched a national campaign in July 2023 to help businesses better acquaint themselves with fraud types in order to prevent them. Those working in the insurance industry describe their side of the challenge as three-fold: they must obviously combat the rising tide of opportunistic fraud, driven by financial ffnews.com

hardships. But they also need to find and thwart attacks from increasingly sophisticated scammers and criminal syndicates who are perpetrating digital fraud by taking advantage of the growing number of loopholes, or ‘blind spots’, found in areas like data analysis and third-party connections. Last but not least, insurers find themselves faced with the mammoth task of policing the digital frameworks

Claims have always been where the most creative fraud crops up and is also one of the hardest areas to get data on to solve the problem that businesses, including their own, have spawned since the digital acceleration post-2020, and which create an abundance of new data and touchpoints – each, sadly, an opportunity for fraudulent activity. “Claims provide the perfect storm arena,” says chief data scientist for Covéa, Tom Clay. “It has always been

where the most creative fraud generally crops up, but it is also one of the hardest areas to get data on to solve the problem – because fraudsters constantly change their tactics, which are really complex things to model. “The structure of the claim itself – long and complicated with a multitude of touchpoints and the involvement of many people and systems – allows for a huge spectrum of fraud types to proliferate by design.” Covéa Insurance is the UK subsidiary of Covéa Group, a European leader in insurance and reinsurance. It offers a wide range of home, motor and commercial insurance. Clay’s job is to ensure the firm and its underlying brands gain the upper hand on claims fraud in all of its forms, which he and his team are increasingly doing with AI tools. “When our journey into AI began, the primary focus was on security and pricing,” he says. “As a regulated business, we needed to protect our customers against fraud because, if we could protect them and pay claims where we should and avoid paying those we shouldn’t, we could provide a higher quality service. Issue 10 | TheInsurtechMagazine

ARTIFICIAL INTELLIGENCE ”But, as we learned more and more about how to engage people, build products, and experiment on an enterprise scale, we started to move further into customer experience.” Today, Covéa is trying to apply AI to as many aspects of the customer journey as possible and the company is building its own internal suite of AI tools. Ghostbot, for example, augments processes in order to detect obscure patterns. “Ghostbot is unique because trust in the AI has been woven into the solution from the beginning,” says Clay. “Every prediction is fully explained in terms that assessors, regulators and customers can understand. With this technology, we have proven a way in which AI can work harmoniously with human expertise to develop a ground-breaking approach to fraud.“ AI has already saved the firm money and in 2022 won Covéa The Insurance Times Claims Excellence Award for Fraud Solution of the Year. Tellingly, the citation read: “Covéa is genuinely invested in their customers, detailing the steps they take to do their utmost to support them throughout the claims process, with high-level expertise and flexibility in particularly challenging times.”

ASSESSING THE FUTURE Clay is hoping that, going forward, the firm will be able to further combine external data points and a new wave of internal ones to create more next-generation services that monitor, predict, and actively steer policyholders. “But we want to use AI to augment our people processes rather than replace them,” he stresses. “For example, when a customer calls us after an accident, which is often a time of stress, we want AI to assist and feed us as much data about the problem that the customer is having as they call us. It can help us understand what happened, what we can do, and what the next best course of action is.” The extent to which AI could transform the relationship with customers is difficult to predict. But it promises to provide intelligent protection that could, ultimately, save not just money, but lives. “In our business, we’re always

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hypothesising on how AI could be used, such as anticipating risks before they even occur – like house flooding, or a car crash – which I believe we could do by marrying a variety of freely open data to new customer data,” says Clay. “Take the example of adding connected vehicle data to motor insurance claims, which could give us more than we have ever known about driving. In the driving seat?: Regulators are still catching up with AI

where you can price a service properly, but you also start to know your customer a little bit better and, eventually, can predict how they are going to behave in a number of areas.” Clay and Covéa champion the power of AI as a money- and time-saving tool, but others are wondering whether the collection of ever-more personal information on people has gone too far. As it stands, studies are showing that most people remain to be convinced of AI’s reliability to establish social reactions correctly or generate conclusions without bias or mistakes, and most are calling for appropriate policing. Both the EU and UK governments have begun rolling out their respective strategies to guardrail the use of AI by 2025, like approving AI systems fitted into transport and banning some types of AI that present an unacceptable risk of bias because they classify people based on behaviour, socio-economic status or their personal characteristics.

PLAYING CATCH-UP Clay believes the successful adoption of AI in insurance comes down to how governments and underwriting entities like Covéa work together. “The barriers aren’t around technology now; With this it’s public awareness and technology, regulation,” he says. we have proven “The public knows that a way that AI can AI has kicked on a lot in work harmoniously the last 20 years and are with human starting to think about how the technology expertise to can help them in their “Early telematics develop a financial life. But there policies looked at how ground-breaking is still a way to go. fast drivers were going approach to fraud “And we know that the and how hard they were regulators are now really braking, but now we can working hard to catch up, although I don’t tell at what temperature their air think they ever will, truly. conditioning was on, or whether they had “You could use AI to automate pretty the windows open. And when you start to much every single process you want, but is correlate that with the weather, you could that the right thing to do? And how do you begin to question if maybe the driver had make that transparent and explainable? been a bit drowsy. “So, I think the future of insurance “We are not there just yet, but this is and banking, and so many other very much the direction I believe we, as areas, will depend on what the regulatory an industry, will move in. environment looks like and how people “It is a natural progression because, understand AI, regardless of the with the amount of data we can amass technology that sits underneath it.” and analyse, you not only get to a point ffnews.com

DIGITAL TRANSFORMATION

EMBEDDED INSURANCE Although still nascent, the embedded insurance industry is expected to skyrocket to $60billion in Europe, $150billion in the US and $200billion in China by 2027, according to Embedded Finance & SuperApp Strategies. One of the pioneers in embedded insurance is iptiQ, which has already struck several pivotal B2B2C deals as it looks to shake up the industry. The Swiss firm, owned by reinsurance giant Swiss Re, operates across Asia, the Americas and Europe, has two million policyholders, and is increasingly working with partners to improve accessibility to products through its white-label life and non-life insurance business It employs two embedded insurance strategies: a partial-service and full-service model. The former plugs into a partner’s infrastructure while the latter manages the customer experience across the entire value chain. Both strategies are bringing brands closer to their customers. Among those it works with across Europe is IKEA and Dutch peer-to-peer motorhome hire firm Goboony. In the case of the world’s biggest furniture retailer, iptiQ created a household contents and a private liability product called Hemsake. With Goboony, it launched a car-sharing per-day coverage insurance integrated into the Goboony platforms. The solution means that vehicle owners have automatic insurance coverage every time their vehicle is hired out. While such embedded products promise to unlock huge additional

markets for insurers, successfully bringing an embedded product to market is not without significant challenges – how to position the product from a marketing perspective, ensure the customer is at the heart of the proposition and that open and effective communication is maintained between the insurer and the insured are some of the key ones. The insurance industry acknowledges that it needs to improve communication with its customers and build infrastructure that improves the interaction between policyholders and firms. With this in mind, iptiQ has recently introduced an initiative called Office of the Customer, a global team of experts in behavioural science, consumer research, and customer experience, who work with iptiQ’s distribution partners to improve experiences for customers. Here, Robert Burr, CEO of iptiQ, sheds more light on the Office of the Customer and how embedded insurance and other trends are transforming the industry. THE INSURTECH MAGAZINE: How has the embedded insurance market evolved since Swiss Re began to explore it? ROBERT BURR: Swiss Re is a reinsurer for most of the world’s major insurance companies, so it’s learned a lot about how distribution works. In 2016, it started looking at what in those days was probably called affinity marketing, and how B2B2C partnerships could be used to give more people access to insurance products, because its purpose as a company is to make

the world more resilient, and to close society’s protection gaps. As technology has evolved, it has taken a very active interest in investing in how we can bring that B2B2C model to life. Insurance can play a number of roles in helping large organisations forge closer connections with their customers by providing services that have genuine value. We see ourselves as helping that process, being able to provide the best quality products to third-party partners, like IKEA, and being able to help them with their own customer journeys. Certain organisations will have their own ways of connecting with their customers, and in those situations, under our partial-service model, we plug in to their infrastructure, to provide the products that they need. When we do that, it’s important we understand the relationship they have with their customers and the technology they use to connect to them. With our full-service model, we are able to go right the way through the value chain. So people come onto the iptiQ platforms and we manage the entire

Insurers now recognise that embedded products are a good route to market… but it’s not always an easy customer journey, says iptiQ CEO Robert Burr

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customer experience. And that’s important, because nobody wants to have bits and pieces of communication, bits and pieces of interaction. It has to be a seamless process for the customer. TIM: Why is digital trust becoming such an important issue for customers in insurance? RB: If you go back to the days of the insurance agent, it was a very personal, face-to-face relationship. The question is, how do you recreate that in a digital world? Swiss Re, as a group, gives its own brand trust the highest possible priority in commercial relationships with clients; iptiQ follows that strategy, and it is super important that we work with partners who share that value. In fact, we’ve noticed that partners and clients call us because of the Swiss Re connection… because we take the DNA of our mothership, and apply that in the digital world. When it comes to building trust with customers, people are still adjusting to using digital means to buy products and services. Some come very naturally – we all trust the Amazon or Airbnb approach. What we have to do is take a complex thought – protecting something you love, or somebody you love – and apply the same principle of trust to it. And that has to happen right the way across the value chain. So, when we talk to partners, we want to know if they share that same philosophy; if they believe that trust in the transaction, or in the interaction, is the highest priority they have? Digital trust, for us, is not just about, 'does the technology work?’. It’s about, ‘does the product work? Does the service

capability work?’. Sometimes they align, and sometimes they don’t. But we’re very lucky in that we can leverage the Swiss Re footprint, which gives us probably more options than many of our peers. In India, for example, we’re in the process of building out a technology centre in Hyderabad, which will work very closely with our service centre in Bangalore. That allows iptiQ to take advantage of a group operation. Here in Europe, we have a wonderful operation in Amsterdam, which does great work both on the insurance product and service side and on the technology side. TIM: Can you tell us more about the role of the Office of the Customer? RB: We want to become an organisation focussed on positive and good customer outcomes. That is the starting point. There are basically three parts to the Office of the Customer; the mind of the customer, the voice of the customer, and the value of the customer. The mind of the customer is all about understanding what motivates a consumer to buy an insurance product and understand what concerns our

IT’S VERY IMPORTANT THAT OUR INTERACTIONS ARE HIGH-QUALITY, SEAMLESS, AND, IN MANY WAYS, ON THE POLICYHOLDER’S TERMS, RATHER THAN OURS

policyholders might have, so we can manufacture even better products. The voice of the customer allows them to interact with iptiQ, and with the partners that we work with. Allied to that is a growing amount of regulatory focus on good outcomes for customers; on being able to provide a compliance capability and a governance capability, so that we are seen by the regulators in the jurisdictions in which we operate, to be focussed on what those outcomes are. When it comes to the value of the customer, obviously, we want to ensure that customers are buying the right services for them. At the same time, we want to make sure that it is commercially viable for us and our partners. So this is something that we discuss with partners at the beginning of the process to find out what products and service offerings they want to make over time. This is not a one-off event, this is a strategic activity over years, so it’s very important that there is alignment between the partner and iptiQ, as to what the right outcomes are for the customer. We consider it a point of differentiation for iptiQ versus our competitors. TIM: How will technology change the insurance industry in the future? RB: I think technology generally offers a wonderful opportunity for insurance companies to do better, in terms of the complex interactions we have with our customers, from selling to customer service, and the claims process. People don’t wake up in the morning, wanting to buy insurance, so it’s important that those interactions are high-quality, seamless, and, in many ways, on the policyholder’s terms, rather than ours.

A true pioneer: iptiQ has been pushing the boundaries of embedded insurance for several years

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Issue 10 | TheInsurtechMagazine

FRAUD

Optimising the claims process As false insurance claims soar, insurers are employing tools like Clearspeed to trust decisions faster, says Jeanette Hernandez, SVP of its Global Insurance Services In the US, insurance fraud costs consumers $308.6 billion a year as it outpaces inflation, with families paying $400-$700 extra in annual premiums, according to the Coalition Against Insurance Fraud. Meanwhile, the City of London Police Insurance Fraud Enforcement Department (IFED) says the number of suspected cases of fraud in the UK shot up by 61 per cent between March 2022 and April 2023. In the US, more than one-fifth of drivers have reported false or inflated information about damage in their claims. In the UK, fraudulent motor claims accounted for more than half (51 per cent) of the caseload, with property accounting for almost a third (29 per cent), IFED said. It also found a growing prevalence of quote manipulation, where individuals deliberately submit false information. With fraud now accounting for more than 40 per cent of all reported crimes in the UK, PwC recently partnered with Clearspeed, a global market leader in AI-enabled voice analysis, to try to counter the trend. Its technology will give PwC’s insurance clients the ability to scale the straight-through processing (STP) of legitimate claims, while flagging those that need further investigation. It does that by applying voice analysis, based on a short, automated yes/no phone questionnaire. AI is used to analyse responses for the presence of risk-associated vocal characteristics and the likelihood of risk, and the results are then shared with clients via API or by giving them access to a web app. Clearspeed has use cases with a greater than 97 per cent success rate in identifying risk and it believes its vocal analysis approach sets it apart from other voice identification models, which can be manipulated. Jeanette Hernandez, Clearspeed’s SVP of global insurance services, says feedback

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integrity sectors, and it is working across 20 countries and in 38 different languages. With the industry seeking better solutions to become more efficient, Hernandez says using new and actionable data is key. “We have one client who looks at the results in our web app and it allows the claims manager to say, ‘these 10 claims are high risk, they need to be handled immediately,’ turning a manual process into an automated process. We know that when claims are open longer, they tend to be more costly. Interestingly, we’re also seeing a high adoption rate with adjusters, because now they have a tool where they feel they can control their claims inventory.” Carriers with their own anti-fraud units are turning to Clearspeed’s technology, too. Some are using it to validate results from their own fraud models. “We’re able to give them a deeper level of insight, particularly around fraud, because Market share it’s not easy to customise some of these is harder than larger platforms,” says Hernandez. “Where ever to obtain and keep, they may have, say, an indicator, or making faster, more a triage for special investigation units, accurate decisions, critical we’re able to now expedite that for policyholder retention through the technology, while also giving them a greater level of confidence. Our data model is with potential risk after the unbiased; there is no adjuster questionnaire, and the asking the questions – it’s simply investigation determined there the technology.” was fraud. You may not need Clearspeed’s latest product to send any is Surge, which helps insurers vendors out address the increasing frequency on that claim, and cost of high-volume saving an expense. weather-related claims. But It is Clearspeed has enjoyed 200 per developing a new product, based on cent client growth in 2023, with the conversational AI, which it hopes will number of insurers among them further enhance its risk assessment tripling in the last year. In fact, capabilities and allow clients to insurers make up half of have more natural Clearspeed’s client As plain as the and engaging base, followed by nose on your face: interactions with government, Clearspeed can customers. security and sports identify most scams from property and casualty (P&C) insurers indicates how Clearspeed’s technology is helping them make better decisions faster. “Simply put, we help get claims in the right hands, faster. But the advantages that we’re noticing are twofold,” says Hernandez. “I think the greatest benefit is customer satisfaction. By fast-tracking those claims that are low risk and getting the payment to the customer faster, we’re seeing insurers note improved retention rates – market share is harder than ever to obtain and keep, making faster, more accurate decisions critical for policyholder retention. “Also, when someone declines to take the questionnaire, it may indicate a person is trying to commit fraud. Each claim an insurer identifies as fraudulent contributes to overall claims savings. An example would be if you identified an auto claim

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TRANSFORMATION

Driving ambition:

From purchase to payout Stefano Bison, responsible for Business Development, Strategic Partnerships & Innovation at Generali Group, and Danilo Raponi, its Head of Innovation, share its ambitious growth and transformation plans – what they mean for the business, its customers and the wider insurance sector THE INSURTECH MAGAZINE: World events have combined to make it an extraordinary few years for the insurance sector in particular. Has the industry suffered or benefitted from that? STEFANO BISON: We’ve had all possible world problems coming together in the past two years – coming out of a pandemic, an emerging war and then macroeconomic issues. The defining moment was when the markets and share values of listed companies plummeted and there were no more initial public offerings and almost no private transactions in the sector. There was only one unicorn and everything was literally falling apart. Now it’s all picking up again, but this event defined things by revealing which entities were real and which were fake. There is the natural process in which the strongest businesses survived and can now innovate much better than before. There was real value creation and the whole ecosystem is now maintaining that. Meeting customers’ needs is the number one criterion for success, whether they are B2B or B2C, but innovation also has to be business viable. Too many companies did not have sound business plans and grew up virtually in an environment where funding was massively available. Now those conditions, which were abnormal, have been taken away and the companies are not sustained by fundamentals, everything is collapsing on them. Nobody expects businesses to have a path to profitability within a year, and innovation often takes five or eight years or longer, so you need to be patient, but you must show how you are going to eventually make money. Yet I keep seeing combined

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ratios beyond 120 per cent or 140 per cent, where businesses are destroying value and creating nothing. At Generali, we’ve actually accelerated our innovation and transformation efforts and many incumbents are doing the same. The market is also offering some good opportunities for bargains. TIM: Insurance is a ‘pull’ industry – presenting people with a premium that’s right for them, which makes them suddenly think ‘I’ll have that’. What technologies does Generali use for this? SB: Customers probably don’t want to hear from us, so we have to talk to them without even mentioning the word ‘insurance’. They prefer ‘protection’, the idea of us being there for them when they need us. Despite the fact that we are so big as the European leader in insurance, represented in more than 50 countries, we are still trying to push customer focus from the centre. There is a lot of AI-related digital data analytics technology to enable embedded insurance, or, as we call it, B2B2C, for motor, protection, health products, etc. Our bet is that most of the P&C growth, still a small part of the overall pie, is coming from embedded insurance – which is growing by at least two per cent more than the average market. We haven’t been as good at promoting ourselves as many startups and competitors, but our B2B2C volumes were close to two billion euros last year. We’re committed to growing our embedded insurance. That might start with

integration with the distributor, sometimes even the last mile of a phone delivery, for example – maybe via a mobile-based app we distribute to our banking partners or retail customers, or a telco might issue our products in a click. We work with Mercado Libre, the Amazon of Latin America, investing in technology at different stages of the value chain and leveraging data. We believe Internet of Things wearables are a way to know much more about the customer, almost in real time. Insurance comes from the moment of underwriting, which is often self-declared data.

Prevention better than cure: Generali aspires to being a partner for life

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GENERALI INVESTS £1.1BILLION INTO TECH

How the Italian insurer is pulling all the levers Insurance is an industry that’s finally on the move, and established Italian giant Generali is leading from the front.

Our bet is that most of the P&C growth, still a small part of the overall pie, is coming from embedded insurance Stefano Bison

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Its customer-centric innovation strategy uses technologies like artificial intelligence (AI) and parametrics to reduce risk and ensure customers receive a speedy and efficient service when they need it most, at the point of claim. Milan-based Generali – whose business encompasses asset management, life, property and casualty, emerging risks and business insurance solutions – is ensconced in a transformation strategy called Lifetime Partner 24: Driving Growth, the ultimate goal of which is to establish Generali as its customers’ single, lifelong provider of all their insurance needs. It is hinging its activities on three customer priorities, identified from research that demonstrated 73 per cent of them want ‘effortless and caring interactions’ in terms of speed, accessibility and clarity. And they want human support, especially around more complex or sensitive issues: personalisation and ‘relationship-based advice’ rather than just a transaction. According to the company’s website, this will see it investing €1.1billion in technology and digital processes to enhance customer value ‘by scaling digital advisory capabilities and establishing a seamless omnichannel approach across all distribution channels.’ It adds that ‘the Group is also investing in scaling up shared platforms, new data capabilities and in the wider adoption of smart automation and artificial intelligence (AI) technologies’. In fact, it identifies data, AI and automation as its most important ‘transformation levers’ to deliver tangible business value, reduce costs, shorten time-to-market and improve customer experience.

Key to that last aim is information, in a world characterised by what it describes as ‘digital humanity’, which creates a need to interpret points of fact – such as images, documents, videos and driving behaviour – fast. As Generali states: “To be a lifetime partner to our customers, we need data to know them, to offer the solution they need, at the moment when they need it, through the right channel. “We need insights to move from the traditional reactive approach to a proactive one, becoming able to anticipate future risks and prevent them.’ Indeed, the organisation takes all of this so seriously that it has established its own Analytics Solution Centre and Smart Automation Centre of Excellence to support its business units in developing best practice solutions – many using AI to analyse customer

behaviour, absorb and interpret unstructured documents and automate more repetitive tasks. In June this year, it restructured its parametrics operation within its Global Corporate & Commercial arm, naming David Weber as head of parametrics, with a remit around increasing the business’ footprint in this space, building on its established partnership with parametic risk transfer-focussed insurtech managing general agency, Descartes Underwriting. Generali’s half-year results, announced in August, showed a sharp profits increase, from €864million to €2.24billion with all arms of the business, apart from life insurance, which has been battling outflows, recording significant growth.

Issue 10 | TheInsurtechMagazine

TRANSFORMATION Thanks to these things, and the data our partners have through their channels and digital apps, and interaction with customers, we can get so much more data than before, to personalise our products, make them more interesting and sell them at the right moment. We still have a long way to go – and some startups are showing us some really interesting possibilities and are much quicker than us in grasping them. But we are trying. DANILO RAPONI: Our Generali Jeniot division works only with Internet of Things (IoT), which we apply to motor, home and possessions. Then there’s IoT for industrial processes, looking at preventing major industrial accidents. Because if you cover a claim quickly, the customer is happy, but if you can prevent it from happening, they are even happier. We are also exploring new and emerging technologies all the time, because we want to make sure we don’t miss the train, and maybe actually be the pioneer – with things like the metaverse and generative AI, including ChatGPT.

The relationship between the customer and the insurer is no longer just commercial. We want to be lifetime partners. That’s very ambitious, but technology helps a lot Danilo Raponi We are testing what use cases there could be and there are lots. We’ve also realised, though, that we need to pay attention to the risks around these new technologies. When looking at automatic claims processing, for example, we asked an AI tool to make up a car accident. We said ‘can you send us a photo of a car accident that never existed?’ and it provided a perfectly generated photo of a damaged Audi A4, with a real registration plate. So we’ve now created a new fraud processing system to prevent that kind of thing from happening. The technology is evolving for good but we also have to consider how we can combat bad actors, because insurance is all about balancing risk.

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The biggest evolution we want to see more of, is more collaboration between insurance ecosystem actors – incumbents, startups and even reinsurers – because the challenges facing the industry, and our world, are so big no company can tackle them alone. TIM: Of all the innovation going on in insurance, payments and payouts seem to be the key battleground for winning and contenting customers. How is Generali approaching this? SB: We’re keen to innovate around this. The payment ecosystem is pretty commoditised already and there are so many options in terms of payment platforms and instruments, it’s about willingness to do something different. All our partners, the big payment providers and card acceptance schemes, are so digitised already, it’s pretty easy to do. However, the payout is the moment of truth and we want to make sure the customer gets paid as quickly as possible. Every case is different, whether B2B, B2B2C or traditional agency distributed models, but we’re working on shortening the time to payout as much as possible, sometimes through parametrics. We have a strategic alliance with Descartes Underwriting and, if we take the example of flooding, handled by our global corporate and commercial and speciality lines division, we would focus on confirming the event happened by searching for news articles, and providing the customer with the money they need to rebuild quickly. In other instances, like when a customer loses their phone, this can be certified quickly to reimburse them so they can replace it straight away. From a technology and payment infrastructure point of view, payouts can now be almost immediate. Not many are doing it, but it is possible. DR: Customer experience in insurance is still lagging behind other industries, so that’s something we really need to work on and AI can help a lot. The payment rails are there, it’s just about connecting the dots. For instance, we’re experimenting with a solution in some countries where, if something happens to a customer and we estimate the claim to be less than €2,000, they just send us a photo and it’s all automated. The AI recognises what car it is, where

the accident was, what needs to be repaired and the cost, and says ‘would you like the money in your bank account or would you like the repair shop to come and pick up your car and sort it out?’ So, they can just click and it’s all done, rather than them having to sit at the side of a motorway, worrying. We reimburse them in seconds. We’re trying to change people’s perspective of the insurance industry, and the interrelationship between the customer and the insurer is evolving. It’s no longer just a commercial relationship. We want to be lifetime partners. That’s very ambitious but we are really trying to get there and new technology helps a lot. Generali is trying to apply similar kinds of easy solutions to how customers buy their insurance in the first place.

We’re working on shortening the time to payout, sometimes through parametrics. From a technology and payment infrastructure point of view, payouts can now be almost immediate. Not many are doing it, but it is possible Stefano Bison

We’ll probably never get to the point where a customer says ‘I’m going to go and buy the new Apple Watch and an insurance policy!’ but payment evolution is important for us, both when someone does it themselves online and when it’s embedded invisibly with something else and they can pay with a solution like Apple Pay. At the same time, it’s important to embed it in larger processes, too, like when they are buying a big life policy, where they are talking about substantial amounts of money. We’re working to embed solutions like automatic fraud detection systems, to ensure no money is being laundered, for example, while at the same time offering a great experience, both when they pay and at payout. We can no longer dictate how they pay and are paid… the days of only giving them their money by cheque are long gone! ffnews.com

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TRANSFORMATION

QuestionTime ‘Transformation’ is often a buzzword, but at esure it’s a mission statement. It wants to transform itself and the entire insurance ecosystem, as James Russell explains If you’ve ever gone through the frustration of an insurance claim that turned out to be way more complex than it needed to be, James Russell feels your pain. His role at the UK’s esure Group – which includes P&C provider esure and the pioneering Sheilas’ Wheels motor and home insurance brands – is ‘insurtech and business transformation lead’. It’s a weighty title to bear, but as a former insurtech founder himself, he’s up for the challenge. “At esure our ambition is to fix insurance for good,” he says. By which he means not just replacing outdated CX and legacy processes with digital bells and whistles, but rather using the technology to

address fundamental shortcomings in claims management that annoy the hell out of customers, and no doubt the staff who bear the brunt of complaints. Missteps, manual delays and poor communication also add cost, increasing premiums across the industry and baking in dissatisfaction. From the customer’s perspective, common sense rarely seems to prevail; equally, institutionalised thinking often crushes any insider attempt to question why insurers do things the way they do. So, it’s refreshing to hear that transformation at esure – which has been in the business for 20 years – starts with just that. And,

asking the obvious, it turns out, gets some pretty impressive results. Take the question: ‘would you be happy to accept a recycled part on a repair to your car?’ More than half of esure’s customers said yes, and so, working with the integrated salvage and vehicle recycling company SYNETIQ, it increased the use of recycled parts by 42 per cent between 2021 and 2022, thus alleviating one of the biggest cost pressures for motor insurers and their policyholders – namely, a critical shortage of motor parts in the post-COVID, post-Brexit supply chain. At the same time, that’s helping to fulfil esure’s pledge to reach net zero by 2050,

Building a new future: esure aims to be a leader, not a follower

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and created a nationwide network of low-carbon body shops. Esure incentivises them to onboard to the Green Parts programme by letting them keep all the profit margin on those parts, which are guaranteed to be A or B grade. “We are seeing real inflation in car parts, and a lack of availability,” says Russell. “That means customers are having to wait longer to get their cars repaired, which means that courtesy car provision is extended, and it all adds to the cost. So we’re working hard with our supply chain partners to take out the friction, delays, and the shortages, to get people back on the road, and get their claim settled as quickly as possible.” “If we can understand our customers better up front – the fact that they would be willing to use green parts if their car needs to be repaired, for instance – we already know how they want to be treated when they experience a traumatic event. By the way, we also have a scheme where, if a customer forgoes taking a courtesy car, we’ll plant a tree to recognise that they’ve made a sustainable choice. “So, for me, it’s about that partnership between the insurer and the insured,” says Russell. “We pay our premiums as customers, and, hopefully, we don’t have to make claims. But it’s the premiums of the many that pay for the claims of the few, so it’s incumbent on us and our customers to work collaboratively to keep those costs under control. “For me personally, having come from a corporate as well as an insurtech background, it’s also important to work for a company that is committed to being sustainable and influencing the industry for the good of society and the environment.” When Russell joined the company in 2021, having exited his business insurance startup Brisk, esure was just starting to rethink its strategy. Since then, it’s made a significant investment ‘in replatforming everything that underpins how we deliver insurance and services to customers’. “We’re working with Amazon Connect for customer communications and with EIS, as the core back-end administration platform, with Kofax and SmartCOMM – so, a lot of leading tech providers to make sure we’ve got a technology platform that puts us on the best footing possible to support our front-line claims specialists and CX. ffnews.com

“We’re also transforming the culture and the way that we, as individuals, work with technology, data and data science. Yes, technology is part of it but it’s about technology and humans working together.” So, how does that translate into the all-important claims experience? “It’s all about taking out the friction and the noise that just gets in the way for the customer, but also for our claims specialists,” says Russell. If a customer chooses to use the website to make and follow their claim ‘we’re surfacing and offering up bits of information that are relevant’, he explains. “So, if there wasn’t a third party involved, or there was no injury, we’re not going to bombard them with lots of questions about that if it’s not relevant. The experience adapts, depending on the circumstance for the customer. “We ask how the customer wants to be kept informed – through email, text, voice – so we can tailor the outbound communications to them. And we’re now

It’s the premiums of the many that pay for the claims of the few, so it’s incumbent on us and our customers to work collaboratively to keep those costs under control deploying a live dashboard that shows customers where their claim is at, and what’s going to happen next. From an internal claims specialist, back-end point of view, when we receive documents, we’re reading them automatically and working out which ones need to go to the top of someone’s work queue.” Russell’s ambition is for esure to forge new ways of utilising AI in the claims process, to demonstrate that if the technology is ‘used in the right way, it can help make claims settlement more accurate but also make that experience far easier and obvious for the customer.’ “You go on to Google or Apple Maps and say ‘I want to go from A to B,’ and it’ll work out all this stuff in the background, but it’s simple for the user. That’s the type of experience I want our customers to have.” And he’s not just talking about esure’s but the entire industry’s.

“There’s a real opportunity for financial services as a whole to collaborate in the service of the customer,” he says. “Providing we are responsible, and the customer consents to it, how can we use all the data that exists, between their bank, their insurance company, and other parties, to understand the customer, what their needs are, and try to prevent bad things from happening to them? “I don’t want to be just following what others are doing,” says Russell. “I want us to be at the forefront.” With over two million customers across its two brands, esure isn’t the biggest insurer in the UK, but you don’t have to be big to be powerful and Russell believes it has a roadmap to deliver great things. “I’d break it down into four steps. We’ve got to get the fundamentals in place, so that we can settle claims and deliver that customer promise, with a really well-oiled machine. That’s the first one. “The second one is how we connect that ecosystem, and get the data flowing to where it needs to flow – whether that’s to a repairer, or a building company, to the company that’s going to replace the person’s mobile phone that got lost… how do we work with that supply chain? “Then it’s about working with other partners in that ecosystem, to identify where we could prevent bad things from happening. And, lastly, how do we do that in a sustainable way, that is in the interest of the customer, the environment, and society? “There is still so much complexity about financial services and insurance that really frustrates me. But you’ve got to be in the mix to try and influence it. “And it’s not just about delivering what the customer needs; it’s also about reducing the costs. Because if, actually, we can reduce the time that it takes us to settle a claim, it reduces the cost of handling and settling that claim, which in turn we can then pass on to the consumer. So it’s really important that we try to be as efficient and as lean as possible. “We’ve absolutely got to continue to provide the protection that people need, but we’ve got to stay competitive while at the same time not adding too much to people’s cost of living, because, if you own a car, for instance, you have to have insurance, it’s a mandatory purchase. That’s front of mind for me and my colleagues.” Issue 10 | TheInsurtechMagazine

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DIGITAL STRATEGY

Hastings Direct has transformed its internal processes, using automation and AI to collect and identify information that allows it to deliver optimal premiums and services to its millions of customers. CIO Sasha Jory unpacks the strategy Hastings Group has a simple strategy: to become the best and biggest digital insurance provider in the UK. Its retail businesses – around 90 per cent of whose policies are directly underwritten by Advantage Insurance Company (part of Hastings Group) – specialise in the very large UK private car insurance market, where the focus is on digital distribution through price comparison websites, as well as direct online distribution through its six brands. Among them, Hastings Direct, which offers car, home, van and bike insurance, has been particularly proactive in adopting new ways of allowing customers to engage with it. It was, for example, one of the first motor insurance providers to let them use what3words to describe where an accident or breakdown occurred. “Probably one of the advantages we have is that we've been able to free ourselves from legacy technology,“ says CIO Sasha Jory. “Over the last three years, we’ve spent quite a lot of time taking out legacy, and bringing in a Cloud-enabled platform with modern software. And that really is a big difference, I think, from some of the larger and older players in the market.“

SPEED IS OF THE ESSENCE Since it was established in 1996, Hastings Direct has rebuilt its line of business applications by embracing APIs. In November 2022, it moved all its operations onto Microsoft Azure. “We are the only insurance organisation I’m aware of in the UK who has all of its Guidewire platform working in the Cloud,” says Jory. “We did that in partnership with Microsoft, and with EY, and with our own internal people. So that was a two-year journey, with about 145 people working on that. Fantastic and exciting.” It has also designed and implemented a micro-service architecture for new enrichment platforms, and completed the shift from waterfall to agile ways of working – all part of executing a complete data centre migration strategy. Finally, it has introduced Cloud-native engineering, reduced major incidents, and

Good data enables us to give our better drivers a really good price, and reward them for their driving behaviour

transformed customer login and quote times. This now allows the firm to leverage AI and machine learning in ways it never could have envisaged before. “A lot of the areas we’ve focussed on have been around processes,” says Jory, “trying to take out some of the manual activities, to speed up our ability to service our customers, and to respond faster to the market. “We’ve used automation in some of the fundamental things, like our testing activity. This means our change is much faster; we can adapt and adopt different things much quicker. We’re also looking all the time to bringing in machine learning and artificial intelligence – particularly around data, and the large volume of data we deal with, so that we can respond to market trends, and to customer needs, in a more agile way.“ This means also being able to add value for policyholders, a case in point being Hasting Direct’s YouDrive, which focusses on data it gets from its customers regarding their driving characteristics. “Good data enables us to give our better drivers a really good price, and reward them for their driving behaviour,“ says Jory.

A journey of transformation: Hastings Direct is leaving legacy technology behind

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DIGITAL STRATEGY She continues: “Also being able to use automation and machine learning around large quantities of data, enables us to bring better pricing, better underwriting and risk decisions into our products, so that we can adapt to the market, but also to our customers’ trends, and price them more accurately, based on their risk assessment.“ Having the data is one thing, using it optimally – in terms of providing more accurate, actionable information – is entirely another. For Jory, it’s a question of balance. “We need to be very careful in the way that we use our data,“ she says. “Hence, we must be diligent when we’re using technology, that we test it, that we validate it, and that we continue to challenge ourselves around any of our models, or any of our automation capabilities. “But I do think that it brings huge capacity to be able to look through large volumes of data, and find those nuggets that will make a big difference.“ This is based on the idea that Hastings Direct can ingest data much faster, meaning it not only has new enrichment sources for its information but is also able to play with it to determine what usefulness there is in the data, before it’s actually brought into the company’s ecosystem in a strategic way. “One of the things we're driving towards is much more digitisation of all of our products and services for our customers, giving them a significantly broader opportunity to choose the channel in which they want to work with us,“ says Jory. “Technology enables us to respond much faster to their needs, and one of the areas we’re starting to examine is sentiment analysis – understanding our customer pain points, understanding how we’re servicing them.“ No one organisation has a monopoly when it comes to information and how to use it. Indeed, given innovation and the speed of change in technology, it’s important to partner with other organisations, according to Jory. “We very much use a partnering mentality. We share our strategy, our ideas, with our key strategic partners, (including the likes of Microsoft, EY and Snowflake). “Often we work with all of them together on particular problems. What I like about partnering is that we actually work with

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them to improve knowledge transfer, so we’re constantly upgrading and offering our people the opportunity to learn new skills, and to develop their technology capability,“ she says.

THE RIGHT TIME FOR AI The relevance of Cloud migration and partnering with third parties is self-evident and indeed has never been clearer, given the perfect storm currently buffeting the insurance industry. July 2023 data, from the WTW/Confused.com Car Insurance Price Index, for example, showed comprehensive car insurance premiums soared by a record 40 per cent (£222)

Consumer pressure: With car insurance now so expensive, potential cost savings through AI are more important than ever

during the previous 12 months, with UK motorists now paying £776 on average. That's the highest since the index was launched in 2006. The surge in premium rates reflects insurers continuing to grapple with a myriad of rising costs, with high levels of claims inflation being driven primarily by the sharp rise in used car prices, amplified by rising vehicle theft, spare part delays, longer repair times and higher wages. These have all pushed costs above premium income and forced insurers to play catch-up by increasing prices, according to WTW. Rapidly coming up on the inside rail, meanwhile, has been implementation of the Financial Conduct Authority’s (FCA) Consumer Duty initiative – effective July 2023 – and the longer-term role AI is set

to play within it. At its core, the regulator's new rules comprise an overarching Consumer Principle that firms must act to deliver good outcomes for retail customers – including those who may not even be direct clients. These relate to products and services, price and value, consumer understanding and consumer support. In addition, they also require firms to ensure consumers receive communications that they can understand, products and services that meet their needs, and offer fair value and the support they require. The FCA has previously put up red flags regarding Guaranteed Asset Protection (GAP) products and how they may be failing to provide fair value to customers. GAP insurance is an add-on to motor insurance and covers the difference between a vehicle’s purchase price and its current market value. According to FCA data, only six per cent of the amount customers pay in premiums is paid out in claims when it comes to GAP insurance. Indeed, the regulator claims to have seen examples of some firms paying out up to 70 per cent of the value of insurance premiums in the form of commission to parties in the distribution chain, such as motor dealerships. In a wider context, there is obviously a significant role for AI to play, through protections from potential imbalances that may impact the integrity, price discovery, transparency and fairness of markets. AI will enable firms to better provide access to financial services for consumers who may have non-standard histories – allowing large volumes of data to identify specific consumer needs while providing better product matches for these (and other) consumers. The major elephant in the room, though, remains whether regulators and governments can strike the necessary balance between promoting the benefits of AI and not undermining it through over-regulation. It may prove to be a fine tightrope to walk. For Sasha Jory, meanwhile, there is no room for complacency – either in her own industry or, indeed, others. As she puts it: “There are always going to be challengers that come into the market, and we’re always scanning to see who those new players might be, and what they will do.” Clearly, there is a lot to think about. ffnews.com

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OFFICE OF THE CFO

Accounting software company Aptitude is focussed on supporting the rapidly changing office of the insurance CFO. Its VP of Solutions Consulting, Liza Richardson, tells us how she sees those changes playing out THE INSURTECH MAGAZINE: Aptitude works across financial services, so how do you support insurers specifically? LIZA RICHARDSON: We take the data from their policy, admin, claims and actuarial systems and put it through an automated accounting rules process to finalise their numbers and produce reports. The idea is to remove a lot of the manual steps involved in those processes, remove the spreadsheets as much as possible, but also to provide really granular accounting. This is not summarised accounting that’s going to the general ledger – rather, this allows insurers to trace everything back to the individual claim, or the individual premium that’s been paid. TIM: Let’s talk a little bit about the CFO. Because there was a time when the CFO was almost regarded as a glorified accountant. Now, they are, arguably, the CEO-in-waiting. What do you understand to be the role of the insurance CFO today? LR: In any organisation, it has changed to be much more of a strategic leadership role than just that of a controller who looked at the numbers, made sure they were reported correctly, and presented statutory accounts. Instead, it’s become a future-looking position. Shareholders want to know how things are going to play out for the business, what the CFO has investigated, what they’re looking at. The finance department is seen to be a partner of the business now, rather than just an overhead. It’s helping with strategic decisions, even down to organisational

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change, helping to restructure businesses and looking at the strategy that needs to be followed. CFOs are looking more globally, too, not just at the market they’re in right now, and the outsourcing opportunities that might come into play with that. We’ve seen lots of outsourcing take place in the insurance industry over the last few years. Organisations have been brought in to manage closed books, for instance, and the CFO would have been instrumental in a lot of those decisions. TIM: Even if you’re a small business, you’ve kind of got to operate on a global scale now. What are the challenges from an accounting and a CFO perspective, and how does Aptitude support businesses there? LR: There’s a difference between operating your business in those areas, and just having a back office in them. If you’re operating globally, then everywhere you go, you’ve different regulators to deal with, and the overheads and expense that goes with that. Being able to report under multiple different GAAPs (generally accepted accounting principles), or different accounting bases, to meet all the different regulatory requirements, is really important these days, because otherwise you just can’t get your books closed. When it comes to supporting these insurers, we start from the principle of capturing every transaction at the lowest granularity, at least initially. So, if you’re subject to three or four different bases, we will account for a transaction in each of them and we will be able to produce

sets of books and records in each one of those bases, and do it in parallel. Previously, you’d have had to do that serially. You’d have one master GAAP, or one master basis for accounting, and, once you’d finalised that number, you’d start making adjustments to get the next one, and then the next and the next, lengthening your close process, and making it much harder. Using manual processes meant your traceability disappeared, too – ‘why did you make that adjustment to get to that number?’ – which also introduces key person risk a lot of the time, because you only have one or two people who know what needs to be done. With automatic controls in place, the system doesn’t allow rubbish data through, either. So, if you can’t account for it under the multiple bases, it’ll stop, because it’s identified there’s an issue. That means organisations can have faith in the numbers they are producing – because it’s being done consistently, and in an automated way, rather than a spreadsheet that could be manipulated, and has no controls around it. TIM: Insurance has been subjected to a lot of regulation over the past few years that has fundamentally affected the accounting process. Does the Aptitude approach make it easier for insurers to comply with regulation? LR: It future-proofs them as much as possible, yes. Because if you’ve got all that data at a really granular level, if a regulation changes, or you’re required to categorise or treat something differently, you’re not having to change the fundamentals of your solution. You ffnews.com

Go figure: The modern CFO still crunches the numbers but now also has a much more strategic role

just add some other data and group it together differently. The software is also very user-driven, so clients themselves can update rules, for example. They’re not having to go back to a heavy IT function, and wait for months for someone to go in and change a bit of code; they can, because they own the rules. That’s key to driving efficiency. As you say, over the last few years, insurance has been subjected to a lot of regulatory change – Solvency II and now IFRS 17, which, if you’re reporting

IFRS 17 has been a significant change for the insurance industry, and it’s really affected the way finance and the actuarial teams work together globally, you really need to adhere to. There are a number of jurisdictions that are going to be late adopters of it, but we’ll definitely be looking at how we help there, based on the learnings we’ve had elsewhere. If you’re listed in the US, you have to adhere to US GAAP but, even then, if you’ve got international investors, you probably have to report under IFRS ffnews.com

to some extent, because that’s how people want to compare, and know that they’re making their investments in the right way. So, even jurisdictions where IFRS 17 might not be a important local reporting requirement, it is still a global reporting requirement, because of the investors, in a lot of cases. IFRS 17 has been a significant change for the insurance industry, and it’s really affected the way finance and the actuarial teams work together. Instead of operating as two separate islands, now insurers have to automate feeds from the actuarial systems and get them into the accounting process. Previously, insurers have not needed to do any accounting from the actuarial system, they’ve just been given a provision from the actuaries. Now, they need to evaluate, at a policy level, or a group of policies level, whether something is profitable or not, based on what those projected cashflows are, and any adjustment for what happens in the real world. You have to operate at a much more granular level, in order to be able to make those assessments, and the IFRS 17 standard has enforced that. It’s fundamentally altered the way things work, and the granularity of data

that’s needed as well. Automation is key to all of this because it’s very difficult, as soon as you have any volume at all, to be able to comply with IFRS 17 otherwise. TIM: So what will be key in influencing the role of the finance department in insurance over the next few years? LR: P&L numbers are going to change, moving forward, so the way that insurers are evaluating their businesses will change – and that will impact the key performance indicators (KPIs). As insurers begin to see the results from IFRS 17, they’ll start thinking about how they set those KPIs. At the same time, there is real pressure for insurers to become more efficient. The new players in the market, the insurtechs, don’t have all the legacy and overheads that traditional players have had. They’re able to start business immediately on a more streamlined basis. The CFOs of these new organisations are already focussed on strategy, on where the business is going, and how to get it there – putting all of the right steps in place, so that they can grow rapidly. That’s really where everyone else has got to get to. Issue 10 | TheInsurtechMagazine

DISRUPTORS Most of his peers think travel insurance is ‘unsexy’ and hard to do, but Kvikk’s Torstein Sandaa-Johansen is determined to change their minds The problem with one-size-fits-all travel insurance – indeed, with any kind of insurance – is that, in many ways, it’s inherently unfair. If you’re a policyholder who doesn’t make a claim, you end up funding everyone else – and the penny is slowly dropping on that front. So believes Torstein Sandaa-Johansen, CFO and co-founder of Norwegian travel insurance start-up Kvikk. Started in 2021, the Bergen-based company is still going through the incubation phase, but it’s already clear how it plans to make waves in its domestic market. “At some point, people will realise the iniquity that exists for ’good’ travellers. If I don’t ever lose anything, nothing gets stolen, and I never actually use my travel insurance, I’m essentially paying for all the people whom those things happen to, because I’m the same risk profile, the same age group, etc, as them,” he says. Kvikk promises to enable travellers to buy insurance through its app in less than 10 minutes in what it claims will be ‘Norway’s best insurance buying experience’. It will also let users choose between insuring themselves all year round or for just the days they are travelling.

While such a product is already more commonplace in markets such as the UK and Australia, much of the insurance sector in Norway, as in other Nordic countries, is still hamstrung by legacy infrastructure. “You have to go online, register with your social security number, and then wait for someone to call you with a quote,” explains Sandaa-Johansen. “So, we thought, ‘what if this could be done instantly, through an application? What if we can do it on the go, at the airport, even when you’ve landed at your destination? How would that disrupt the travel insurance market?’.” Technology will obviously be Kvikk’s key differentiator in the Norwegian market. Unlike many incumbent insurers, its app can handle instant payments and instant claim settlements, making for a faster and friction-free customer experience.

Young people [in Norway] are the most underinsured segment of the market overall But its main point of pride is geofencing. “We use geofencing in our application, which means that once you leave the country, we can start your cover,” Sandaa-Johansen explains. “Instead of being insured all of the time, you can be insured when you’re actually doing the travelling. That’s a pretty essential technological component, which we believe gives us the edge.” While Kvikk is pushing the whole mobile-first, instant-purchase aspect of its product, it is also seeking to specifically target young people – who don’t tend to care much about things like travel cover. “They’re the most underinsured segment

Way to for go 36

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of the insurance market overall, and that's a particularly striking fact with travel insurance, when you consider that they are the people who probably travel the most,” says Sandaa-Johansen. “When we looked into it, it turns out that most young people think that insurance is complicated, inaccessible and, frankly, quite unsexy. Fundamentally, no one likes to think about all the negative stuff that happens, so we instead promote it as ‘exploring the world is fun, but it’s important to remain safe and to be taken care of’.” Analysis of a company’s marketing strategy isn’t what you’d traditionally expect of a CFO. But, as Sandaa-Johansen points out, it’s probably the most rapidly changing role of the C-suite and that’s a good thing, he believes. “I think being a CFO is more and more about being a jack of all trades, instead of just specialised in finance,” he explains. “You still, of course, have to know the financials, but it’s not enough to just focus on that; you have to be able to contribute to the rest.” As for the future, it’s still early days but Sandaa-Johansen sees Kvikk as part of a wider societal shift from a traditional concept of ownership to shared use – pay-as-you-go, pay-as-you-use services – which is what makes insurance so ripe for innovation. “Insurance is the most under-innovated sector, mostly because of a lot of old systems that everyone’s afraid of shutting off,” he observes. “So, they’re just keeping them running, and keeping the money machine going. For at least the next 10 years, that’s going to be, essentially, our advantage.”

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PARAMETRICS

QUICK FLASH Parametric insurers settle claims rapidly and with minimum fuss. FloodFlash CEO and Co-founder Adam Rimmer explains why speed is vital for SMEs on the brink With the world dealing with more and more freak weather occurrences resulting from the effects of global warming, the insurance industry is facing a new frontier. The recent floods in New York – on the back of the tragic flooding in Libya – are a timely reminder of the increasing human and financial costs that come with unexpected climatic extremes. But with only 20 per cent of the world’s $70billion annual flood losses insured, there is a clear under-insurance problem across the globe. While homeowners in Britain have a degree of protection through Flood Re – a joint initiative between the government and insurers whose aim is to make the flood cover part of household insurance policies more affordable – SMEs enjoy no such provision.

It is in this environment that parametrics have emerged as a solution to the under-insurance of flood risks. While traditional indemnity insurance pays out a claim based on the value of the loss suffered, parametric insurance policies settle only upon the occurrence of specified events (for example, weather events). Payment is automatically agreed when predefined triggers are met, such as depth of water in the case of floods. A leader in this field is insurtech FloodFlash, which provides rapid payout policies that, it says, are changing the way landlords and businesses recover from flooding. Each policy it issues is linked to a mobile-connected sensor installed at the insured property. The sensor reports any flooding and, when the agreed trigger depth has been reached, it alerts FloodFlash which then kicks off the claims process, with no documentation or

time-consuming appointment of loss assessors required. In many cases, payment is authorised in a matter of hours, rather than weeks – a lifeline for businesses that need to be up and running as quickly as possible if they are to recover at all from a flooding event. As chief executive officer and co-founder of FloodFlash, Adam Rimmer explains: “A lot of these businesses are operating on fine margins; it is becoming an increasingly competitive commercial landscape out there. They need cash fast to be able to survive. And that’s where we can help.” We asked Rimmer to outline in more detail how parametric policies are transforming the insurance landscape and how FloodFlash’s three self-proclaimed core benefits – availability, flexibility and a fast claims experience – are playing out in the real world.

Whatever the weather: Parametric solutions are helping insure against extreme climatic events

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THE INSURTECH MAGAZINE: Parametric insurance has been around since the late 90s. Why would you say that it’s more relevant today than ever? ADAM RIMMER: It’s really driven by a couple of things, both on the demand side and on the supply side. The problems that parametric insurance is best suited to solving, which are really around low-frequency, high-severity risks – like catastrophic floods, earthquakes, hurricanes and wildfire – are getting worse every year, and that is driven by urbanisation, which is driven by population growth, and by climate change. If you took at the population of the US, for example, you’d be hard-pressed to disperse the population in areas more exposed to natural catastrophes – it’s either earthquakes on the West Coast, or hurricanes on the East Coast. We’re also seeing traditional insurers step further and further back from covering these events, and the industry needs to find a way to step up to fill that gap. On the supply side, whilst this idea of parametric insurance has existed in various forms for a while, certain technologies now mean we’re in a position to be able to bring it to the mass market for the first time. Things like computer power, for example. If you’re modelling the outcome of a flood, or a storm surge event, that’s a difficult and computationally intensive task. Computers are now at a scale where we can reasonably do that, at a fine enough grid, in a fine enough resolution, to be able to put probabilities on water depths, on the ground shaking in an earthquake, on a building-by-building basis. And that means we can do customised, individual parametric insurance for the first time. TIM: One of the biggest issues that we see for a lot of insurers is being able to meet the demands of specific customer segments – small/medium businesses, small landlords, small landholders and the like. How do you manage to serve them? AR: These people are certainly left exposed by the industry, particularly small businesses in the UK. As I said, insurers are retreating, so, at the moment, if those businesses have flood cover withdrawn by their insurer, or if they have a very large flood deductible imposed by their insurer, then that business is on its own. ffnews.com

And the great irony is that the people that that’s happening to are, of course, the people who need it most, because they’re the ones that the insurers are worried about flooding. Maybe a good illustration of this is one of our UK customers, Martyn. He runs a manufacturing business in the Calder Valley, a beautiful area of the country immortalised in the TV show Happy Valley. But it’s had its real share of flood problems, over the years, and insurers won’t touch lots of businesses like Martyn’s. He’s done all the resilience work, but still the insurers won’t cover him. He supplies major supermarkets; if he can’t get back up and running fast after an event, he will lose those contracts, he will lose his livelihood, and he won’t be able to recover from catastrophe. And that is the precise situation that we at FloodFlash are trying to stop happening. So, we were introduced to Martyn and installed his sensor. It’s just as well we did because about a year later, on February 9, 2020, Storm Ciara hit the UK. This was a catastrophic event for big areas of the country, but for the team at FloodFlash it was the first opportunity for us to prove

In many cases, payment is authorised in a matter of hours, rather than weeks – a lifeline for businesses that need to be back up and running that parametric insurance was not just a cool thing to talk about at conferences, but was actually a product that really saved livelihoods. Anyway, the floodwaters came in, Martyn’s FloodFlash sensor sent the data to us back at HQ and we were able to verify the flood event. We ultimately sent him a full claim payment – that would normally take months to adjust and settle – within 24 hours of the event. And that’s not from claim reported to claim proved, like a traditional insurer would measure it; that’s from water actually entering his building, to the cash entering his bank account. That meant that his business survived, it meant that his livelihood survived, and it meant that he recovered from catastrophe.

TIM: After an already stressful event, customers want insurers to remove as much friction as possible from the payment process. How can parametric insurance help with this? AR: There’s a great stat from FEMA, the Federal Emergency Management Agency in the US, that says that 90 per cent of small businesses that don’t reopen their doors within a week of a catastrophe will close their doors permanently within a year. That tells you the significance of cash flow. And the speed of cash is more important to their survival than getting the perfect pound-for-pound indemnification. In many ways, that’s the trade-off with parametric insurance. You may not have perfect pound-for-pound indemnification – like life insurance, parametric insurance, is a pre-set pay-out, even though the customer can decide the amount that works best for them – but as long as that pay-out is about the right amount to get them up and running, that’s typically what a resilient small business owner wants. They just want to get going again. TIM: How does the new technology of the FloodFlash sensors intersect with traditional insurance assessment to deliver those faster payments? AR: We use Internet of Things technology, low-cost, low-power radio wave setups that allow us to, for the first time, monitor these natural hazard parameters at a low enough cost to make this work for the mass market. And the real crux is that we have decided the amount [of risk] up front, alongside the customer, and, typically, their broker. We have a tool called Smart Quote that brokers can use, and that helps them, alongside their client, to set the right trigger depths and pay-out amounts. Let’s go back to the example of the manufacturing business in the Calder Valley that I mentioned earlier. Martyn was able to say, ‘when water gets to 20cm, it’ll enter my building. I’ll just need to clean it out. That’ll be about £10,000. When it hits 50cm, it hits my stock, which is worth about £50,000, so I’m going to need another £50,000 payout. When water gets to 80cm, that’s when it hits my machinery and that machinery is worth about £200,000, so that’ll be the amount I need.’ He has this graduated series of increasing pay-outs, as water gets deeper and deeper, and affects more of his business. Issue 10 | TheInsurtechMagazine

PARAMETRICS

It never rains but... Flood under-insurance has become a critical issue for UK businesses

Because we’ve agreed that up front, the only thing that we and Martyn need to know, to trigger that payment, is whether the water has hit that depth. And that’s what the sensor allows us to do. So Smart Quote helps set the pay-outs and the depths, the sensor relays that triggering parameter to us, or whether the parameters have reached that trigger, and that then allows us to release the payment. TIM: How do you balance the need for speed with the necessary checks and balances of sending money of this volume? AR: We do, of course, have a responsibility. It is a regulated business and we need safeguards in terms of anti-money laundering checks, sanctions checks, etc. We also want to make sure that there is no element of fraud going on, and that’s one of the things that the signatures of floods from the sensor, and other sensors in our network, allow us to confirm, before any of these payments is made. The value we deliver is cutting claim settlement times from months to days, or from months to hours. And when we have the right technology in place, it allows us to conduct the necessary checks before we send these large sums of money within that time frame. TIM: Embedded insurance is seen as something of a game-changer, in some quarters. How, if at all, does parametric insurance fit into this landscape? AR: Embedded insurance is an exciting space, for sure, but it’s also something that we need to be slightly cautious of. I’m a great believer that insurance should only be used when necessary and when

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needed. We need to use insurance for the things that we will struggle to recover from. For some people in high-risk areas that means floods. The thing to be careful about, with embedded insurance, is that if the insurance is coming automatically with the product, are you really selling that product to people who genuinely need it? So, for example, I don’t think it would be right to embed FloodFlash in every single household policy in the UK because I wouldn’t want to be charging people who live on the top of a hill for cover that they don’t need. That does not advance our mission of helping more people recover from potentially catastrophic events.

I don’t think it would be right to embed FloodFlash in every single household policy in the UK… I don’t want to be charging people who live on the top of a hill for cover they don’t need Where the idea of combining FloodFlash with other products becomes really interesting is embedding it with other insurers, because our product is so complementary. We talked earlier about how insurers who withdraw flood cover in high-risk areas and add large flood deductibles in high risk areas, are really causing so much flood loss to be uninsured every year. Excitingly, we’ve launched a partnership with Aviva, the largest general insurer in

the UK. Aviva has risks that they want to write, but are reluctant to do so, specifically because of the flood risk. Conversely, we want to write the flood risk for those areas, and so it’s a perfect partnership. Aviva now has FloodFlash on its broker marketplace, so when Aviva is quoting policies with flood deductibles, or with flood exclusions, for business it otherwise wants to write, the broker is then encouraged to fit FloodFlash in alongside that Aviva product. And that is the future – that perfect complement between the parametric product and the traditional indemnity product that surrounds it. TIM: This leads nicely into the subject of partnerships. Who do you work with to bring the FloodFlash solution to customers? AR: As a managing general agent we act on behalf of a much bigger company, who sits behind us and has the right balance sheet to be able to hold this catastrophic risk, and has the size and liquidity to do so. For us, that’s Munich Re which is the largest reinsurance firm on the planet, and is a fantastic partner. Alongside Munich, we have a three-way partnership with Vitesse, for example. Vitesse is the payments platform that allows us to inject speed into our payments, and allows FloodFlash to help more people recover from catastrophe in a way that hasn’t been previously possible. At FloodFlash, we have this real degree of specialism in a specific type of product that can help solve an enormous global problem. So that’s the bit that we focus on. That’s the bit we can do better than any other group on the planet. ffnews.com

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