Live at The Steelyard on 29th January event. Part One: The Partners Panel and Part Two: The Experts Speak.
Robin Merttens, Matthew Grant and Paolo Cuomo, the InsTech London partners, talk to Mark Geoghegan of Insurance Insider.
The first half of our event on 29th January 2019. We discuss whether partnerships between the start-ups and insurers are failing, and does that mean that disruption is back on the table? What is happening globally, who has made a difference in 2018, and yes, what about blockchain? We had a packed evening for this one – over 200 people in the room providing some great questions.
We are back with the recording of Part 2 of our 29th January event from The Steelyard. For the second half of the evening some of the leading figures from the insurers, investors, innovators and the start-up community gave their 5 minute view of what they are seeing, and their opinions on the future of insurance. Names and time stamp below.
Sam Evans the Founding Partner from Eos Ventures (2.27)
Milan Sud, Head of Innovation at AXA (7.45)
Niall Barton, CEO of Wrisk (13.14)
Dominic Suchett-Kaye of Aon Reinsurance Solutions (20.19)
Madeline Bailey, Head of Strategic Initiatives for MSAmlin (25.50)
Tom Hardcastle Partner at Ninety (34.40)
Erik Abrahamsson CEO of Digital FinePrint (41.13)
Saadhvi Khullar European Portfolio Manager for Munich Re (46.00)
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Transcripts for these podcasts
Part One podcast #17
00:03 Matthew Grant: Welcome to episode 17 of the InsTech London podcast. This is Matthew Grant, one of the InsTech London partners. This week, we are bringing you the panel discussions live from our event on the 29th of January in the Steel Yard in London. And in a break from our usual format this time we had the three of us as partners in Instech London myself, Robin Merttens and Paolo Cuomo talking about what we’ve seen in 2018, in the area of InsurTech and what we’re looking out for in 2019. We were delighted to have Mark Geoghegan, the executive editor of Insurance Insider as our guest host. We also had a crammed room all evening, over 200 people in there, a very lively crowd with some fantastic questions. I think you’re going to enjoy this.
00:53 MG: Good evening. So we’re going to bring the panel together, we’re delighted, as I said, to have Mark Geoghegan. Mark is well known in the insurance industry, and like all good journalists, he doesn’t pull his punches.
01:04 Mark Geoghegan: So let’s just get cracking, was it a busy year, are we really innovating? That’s the first question, this is supposed to be all about innovation, is there really innovation happening Robin?
01:18 Robin Merttens: Yes, we’re innovating in the sense that we’ve moved to dial. Are we truly digital? Are we ready for a digital model. My current thesis on this, is that we’re not doing enough, fast enough. I think that customers expect far more from insurers these days than we’re able to deliver. And I feel a little bit like 2018 was a kind of year in which we stalled. InsurTech is only three or four years old. So at the start it was, “Careful, careful InsurTech is going to disrupt you.” The next year was all about AI Blockchain, all kinds of concepts, not everyone knew quite what they did, but let’s see what they can do.
02:13 RM: Last year I think we really found out what was good, and what wasn’t good. Increasingly, you can see the people who are good are ‘backable’ and biddable and they raise money. But also what happened is that InsurTech, and insurance started to partner and I think that the consequence of being a partner is that people have gotten lazy. So now, insurance companies are doing what they want to do, they’re not really disrupting the model, they’re adding a little product that does Uber drivers or something but it isn’t moving the dial. And I’m slightly worried now that disruption has gone off the table. I don’t see people building full digital models, I don’t see new, new products. I see a slightly comfortable scene returning.
02:56 MGeo: What so everyone’s got sort of coupled up and so they’re not out on the pull anymore, is what you’re saying.
03:02 MGeo: They should be, they should be. So it is right for you to say that, Mathew is it really just all about…we’ve seen the successes so far have been more about companies making tools that help incumbents be better underwriters, or better at processing their policies or doing other things and there doesn’t seem to be anything that’s genuinely trying to take over the world and generally digitise the whole thing, a full stack. Is that really the way it’s going to be? Do you think there are companies that you’ve been involved with, Cytora for example, things that have had traction and adoption but are they really radical enough? That’s what Robin is saying, I think?
03:41 MG: Yes that is going to be I think the real question is, when is it going to happen? We all expect and hope it’s going to happen in 12 months. It will get there. I think the question really is, is it going to be around this collaboration or is it going to be around disruption? And I really do think that actually the only way to make change is really going to be disruption. People yeah, say Lemonade’s a joke to some extent because they’ve raised over $100 million and they’ve got a fancy website, and look at their loss ratio, but the reality is, if you actually want to get out there and do something different you probably do have to put a bunch of money at it, you have to get access to capital, you’ve got to market it and actually that’s probably not going to happen through an insurance company, unless it decides it’s going to set up its own unit and let it get on with it, and go for it. So yes, I think it’s going to happen, but I wouldn’t want to say it’s going to happen in the next 12 months.
04:29 MGeo: Well Paolo you have got to say something. So a very credible digital full-stack insurance company fully disruptive with its own capital has got to emerge at some point.
04:41 Paolo Cuomo: Yes, probably I think though it’s going to emerge, it’s going to emerge in Asia, because that’s where there’s a real driver for change. And so there’s a real opportunity, a little bit to what Robin said, for people just to sit on their laurels. Now that we’ve moved beyond the disruptive fear of the last couple of years, into this sort of chummy, “Oh well actually, yes we can work with them,” and to Matthew’s point, a lot of the more successful companies, those that are offering services allowing incumbent insurers to, well not just to feel that they’re doing things in an innovative manner but genuinely are. If someone is working with a Cytora or Digital Fineprint, they’re doing something genuinely different and it’s making a real difference behind the scene, but it’s not changing the fundamental way that it works and so that’s not going to drive the creation of a full stack digital insurer here.
05:26 MGeo: So do you all agree that, with this incumbent industry sort of technological stack, that the sort of rotting heap of different spaghetti that they’ve got, that you can’t do anything with it. Is that the point?
05:40 RM: I’m quite clear on this, lipstick on a pig doesn’t do anything. Everybody has a legacy stack. The legacy stack is the excuse. So I’d love to be able to innovate, but I’ve got this 1988 pile of crap that I use as a policy admin system.
05:55 RM: And there’s a second part to that which is, “Bring me new product ideas,” followed by, “Have you got 10 years of historical data on how that would work?” “Well, no, because that’s a new product idea and no one’s ever done it before.” So if you put those two things together, I haven’t got the infrastructure to do this, and my underwriters require a historical data set. You’ve got the mindset wrong right from the start. That’s analogue thinking with a kind of digital extension, it’s not digital thinking.
06:29 MGeo: I think there would have been a quite a lot of thought in the last couple of years that, perhaps the best way of going about this would be to create some sort of super-MGA. Do any of you think that’s still the way to go or is that not going to work?
06:42 MG: Possibly if you find the right line of business to get into, if you’re trying to do an MGA that’s going to come in and write commercial property insurance, then you’re competing against a market that is pretty well established. So you have got to figure out what do I have to offer as my MGA, that I’m going to be better in every sense, better distribution, better pricing, better risk management. If however you decide that the legal cannabis market in the US is going to be 150 billion by 2025, and you’re going to build an MGA to go and chase after the legal cannabis market, then yes, hey, go and have fun and make a chunk of money, because you found a niche or not so niche business that you can really get behind.
07:21 MG: And so yes that could be your mega-MGA but I just think the real challenge for everybody, whether it’s tech, or whether you’re an established business is, you are pushing against a really strong existing market that you’ve got to displace and you can’t do that cheaply.
07:36 PC: Can I just take this back to a couple of things Robin said? So I think, yeah, IT is a good excuse. Yeah, I think we should be slightly careful beating people up, because they say, “Oh, the IT doesn’t let us do it.” Because ultimately at the same time we’re saying “Look, we want to use the data accurately, we want good reporting and things,” and then we tell someone, “Hey look, don’t use IT as an excuse, go and set it up over there.” Yes, how do you track it?
08:00 PC: So that is a valid problem that everyone needs to work harder. I think the point however, “Oh we don’t have historic data, therefore we’re not confident about pricing it.” That isn’t some acceptable excuse. The point is that if you’re a bold actuary, you know these days as everyone is saying, “Well, do you replace actuaries with data scientists?” There absolutely needs to be a way of being comfortable underwriting risk that you don’t have 10 years of data for. And where the industry is shying away from that, I think it’s less excusable.
08:29 MGeo: Do you think Robin, surely technology is going to give you the answers to these problems, you won’t need a 10-year loss record, if you actually know everything about the risk?
08:38 RM: Yes to do that though you need to change your current profile of your underwriters. Because they’re all analogue 55-year-olds, who’ve done the spreadsheet for 35 years. Giving them the latest AI learning to tell them what the price of their cyber risk is, just doesn’t fly. So to some extent you go back to the cultural problem there, but your super-MGA problem, I would be amazed if the companies that have got a truly dynamic underwriting platform ala Trōv, Zego, Flock, don’t at some stage get bored with a model that says, “Partnering up and growing slowly with a company that gives me a bit capacity is not what I came in to do,” and would go after the capital to enable them to write in their own name. I just feel this comfortable partnership model is not going fast enough for the really best InsurTechs, and I think they will break out and go back to disrupting.
09:42 MGeo: So they have to make the leap?
09:43 PC: Well yes, but do they need to go full stack? This comes back to what I think will be an interesting question over the next couple of years. Yes they need access to smarter capital than a classic carrier. I would agree with Robin on that. But do they need to own it themselves or do they need to look at all the other possible options of sourcing capital? And that’s going to be an interesting question because these are smart people, they’ve worked out how to track customers, they’ve built a technology platform that works, the natural next question, is how to get the best access to capital?
10:12 MGeo: So super-MGA is not actually a dead idea, if you’re smart enough to be able to do everything that an insurance company does on a virtual basis and get the capital in around the backdoor, you can probably do it.
10:22 MG: Yes, I mean look at the ILS market, it’s now worth $100 billion, the retro market for conventional insurance has gone. As you said this morning at your event, Lloyd’s has lost that whole ILS bit. So yes for the industry to be able to find alternative forms of capital they don’t actually need to do very detailed rigorous analysis, they need to do enough to know that they’ve got a good handle on their aggregation and diversification, they can come in and undercut the conventional market. It took a while to get there, but it has definitely happened.
10:52 MGeo: With the MGA thing, I think about the intermediary…being a super intermediary, being a digital intermediary and almost being that digital interface to the customer, to the commercial customer, and representing that old incumbent capital and just letting them plug in at the backend. Are there any other impediments to that? I’ve heard it said that with some of the new classes that InsurTech is going after, like the gig economy, you can’t make enough money being an intermediary to make the business work, is that correct, do you think, is that a correct supposition?
11:31 RM: I think so, because a lot of what the InsurTech world has gone after is gadgets, is being a delivery driver for a day. And the premium is 10 pounds, the commission is 20. You have got to write a lot of business to make that work. And then if somebody excludes half your business… One of the big problems is, if you’re used to a data set that is on an annual renewal basis and someone comes in and says “I’m doing it for a day,” then there are not enough people to be able to do it with. And then there are lot of exclusions. So by the time you’ve finished all that, and you’ve got 20 developers and you’re burning a million pounds a year on your development costs, you do struggle to get out from under. And I would expect people to go after the risk itself at some point.
12:30 MGeo: Something else obviously that’s been big in the last three years is accelerators and incubators and all of that, and there was even one at Lloyds. What’s been the value of those? What’s your assessment of them, through experts?
12:48 PC: I think they’ve been absolutely a necessary part of the journey, excuse the expression. I think, three or four years ago, the incumbents who knew they needed to do something, didn’t know what they needed to do. And so, the creation of a lot of these, even though there was a huge amount of fluff and drove a lot of Insurtech tourism where the cool thing was to drag the board off to Silicon Valley and they came back four days later with a new hoodie and the desire to do all their meetings standing up, it was necessary.
13:18 PC: And what you see now is you look at those carriers who’ve worked out what they can do for themselves and they’re doing it in-house, often much quieter. And there are innovation managers from the carriers sitting here who have a good if not better knowledge than Matthew and Robin about every single startup out there. Then you’ve got those carriers who are still relying on a lot of these more generic industry incubators, and their time is past I think.
13:45 MG: Thanks Mark. That’s why we asked you to be here, is to ask, “How do incubators compare to Instech London?” I think the question for anybody getting involved in those from the outside, so not so much as somebody getting on them and I’m sure Eric Abrahamson can tell us the benefit that Digital Fineprint got from their multiple accelerators and incubators journey. But I think there’s a lot that could be gained from events like this where you get exposure at very good value to lots of companies and people.
14:14 MG: I wonder why companies pay vast sums of money to go to some of these incubators when you can turn up for free as a mentor. I think, certainly, there’s value, if you’re going through that and you get the benefits. But if you’re sponsoring and supporting it from an outsider, that model, it seems to be changing in terms of what people are spending on those as an insurance company.
14:36 PC: So their days are numbered, you’d say?
14:41 RM: I think they were good in what I’d call the curiosity years, so when people were curious and they needed to find out what was going on, join one of those and see a lot of start-ups and learn. I think my observation about 2018 was it was the year in which people started to make up their minds, what accelerators and incubators work, which conferences to go to, who knows what they’re talking about, and who doesn’t know what they’re talking about. By now, it’s starting to fall out. And I think that a lot of those incubators have good models, but what they lack is true, true domain knowledge. The domain knowledge is still very, very thin in InsurTech and insurance.
15:20 PC: They used to be generic and now there are ‘horses for courses’. And if we do look at the Lloyd’s Lab, which I know well, the value there of taking startups and putting them physically and emotionally close to underwriters and brokers who may otherwise not engage with these start-ups, definitely is a value. But I think to the point that’s made, it’s the discussion between the right people now in the market. And three years ago, the only way to help people even work out where EC3 was, was to have a big banner saying, “Incubator, come this way.” Now, the right people know the right people, and it’s the quality of the conversations, the ones that a lot of you have on evenings like this and come along. That is, it’s what’s driving the person with a smart idea, the person with the need at the carrier, the broker who wants to do something different. They’re already talking to each other.
16:07 MGeo: I’m going to put the audience on notice that you should get ready to get involved in this conversation in a few minutes. But before that, I think you should get specific about some specific things that you’ve liked or not liked in the last year. Particular companies or anything if you can, if you dare. What’s been working, what hasn’t, in a much more specific sense?
16:30 MG: Well, I’m a great fan of real revenue and real clients. Two companies that I work pretty closely with that have been building out new clients, one is Cytora in the AI space, and they’ve established some really strong relationships with some pretty healthy pricing. Another one, is Nick Mair at DQPro. Some of you may know Nick, but he’s just got out there with a really small team, and signed up nine companies in 12 months with a tool that basically does something very important but very simple, which is help people to handle data. And there’s different ways of handling technology and building a business. You can get a large investment and you can go for it and that’s one great model or you can just get on with it and deliver something people want, bring the money in, prove it, iterate and go from there. Those are my two companies to watch for 2018 and 2019.
17:22 RM: Yeah, if you want to see who’s ‘backable’, you look at where the money is going and someone like Shift Technology can raise 40 million in a heartbeat, because they’re transforming the way which you do claims fraud technology analysis and everybody wants it. I think that’s going to be really big. All those things which are machine learning, AI driven, need two or three years to learn and that two or three years is up. I also really like things which are client, end client backed. I still think it’s a failure of InsurTech as a community that we haven’t got…
18:00 RM: …I bet we haven’t got a single risk manager or end buyer of insurance in the room. That’s just not happening. And Maersk came into the equation in marine 18 months ago and changed it single handedly by saying, “I’m a customer, I’m going to tell you what I want to do, what we’re going to do.” Therefore, like the Niall Bolton type thing, BMW in the room, building what BMW want him to build. That’s a model which just has to work, that’s what the customer is telling us, the industry, that they want.
18:29 MGeo: And also, don’t forget, things that are coming up. There’s still so much of dry powder out there and so much capital’s been raised and so much stuff has been developed. What’s coming up in the pipeline, as well?
18:40 PC: I’m absolutely agreeing with Matthew and Robin, but what I think has been wonderfully concrete is the individuals who are part of bigger organisation in 2018 have finally really started to see what a difference they can make, rather than just letting their enthusiasm be batted back. I met a young man the other day who took time out to do a part-time Masters, and his focus was on the application of AI to nudge theory to get underwriters to overcome the inherent biases that humans have.
19:10 PC: Now, that’s absolutely fundamentally important if we say humans are going to continue to be part of the equation in complex underwriting for the next few years, at least. And I’m sure if he suggested that idea a couple of years ago, he’d have been told to go away by whoever in HR said, “That’s irrelevant.” He’s fought his case, he’s understood that, and now the poor lad has got to try and work out, to get any underwriters to take him seriously, but at least he’s soldiering on.
19:36 PC: It sounds cliché to say that it’s a rising talent that’s really going to drive this but when you’re sitting in a big incumbent insurer or broker, kudos for those of you who, instead of quitting and trying to do a startup, are trying to change things from inside.
19:49 MGeo: And one more thing before we open this up, we’ve got the founders of Instech here, we need to ask them, what actually – this is the first meeting of the year – what’s happening with Instech and also you got involved in this global alliance, didn’t you, the global insurtech alliance, is it called JITA?”
20:06 RM: It’s GITA. We could call it JITA!
20:09 MGeo: GITA. What’s that? And what’s that all about? And is that doing anything or is it just one of these vapour-wear things that happen sometimes? And main thing is, what are the plans this year for Instech, what are the people out here going to expect from all of you guys?
20:24 RM: We can do vapour-wear as well as anyone in the industry, I’ve made a career on it. So there a lot of groups like us, in Munich, in Cologne, in Singapore, Hong Kong, wherever and they’re all communities. And the theory which I believe confidently will be supported in 2019 is that there is potential in putting all that together, the ability for the industry to be able to say, “What is happening all over the world, which start up should I be following, not in London but globally, so that we could unite our intelligence and our knowledge.”
21:02 RM: And I think that, insurance is a global business, I don’t know why Insurtech would not be global with it. And then the other thing that I think we will try and do here in Instech London is create a hub, a physical manifestation of our own. I would really like the ability to put together 20-25 seats where people coming down from Leeds, Manchester for the day, would be able to join a pre-existing network where people came in from Australia for a week and would have a place to sit. Just oil the wheels of a networker community where they could meet like-minded people and be part of something.
21:41 MGeo: Great.
21:42 MG: Plug and play, look out, Robin has got his eyes on you. I’d say Mark, we’ve now got a fantastic community and thank you for all your support and many people find real value in these events, through partners, capacity, capital investors, the rest of it. We’re going to look for ways to actually make that happen outside of the regular events we’re doing, we are going to be continuing with our monthly events, we’re doing private events now, we want to find a way so you can actually engage with each other either through us or directly in a more effective way outside of just being in these physical events.
22:18 PC: Thank you, yes, so just to repeat the global point, I think this is why the GITA initiative is important because there’s an awful lot to learn from elsewhere. It’s very, very easy to read the various blogs and newsletters that come out of the US and there’s a lot of people flying Trans-Atlantic all the time to see what’s going on, but I do see that what is happening in Asia is phenomenally important for us to learn from. And it’s not particularly easy if you’re sitting here in EC3, to know that. So where we can play a role in many ways, doing what we’ve sort of achieved over the first few years, over the last four of really bringing together people who were maybe only a few hundred yards apart, but didn’t know each other. And if we can turn that global, if we can get the right people and the right ideas from Hong Kong, from China, from Malaysia, then I think that’s going to be of infinite value to people in this room.
23:04 MGeo: So come on, put your hands up.
23:07 Audience question: There we go. My question is around the international vision. What do you really want to create, do you want to create more of a global alliance for people to be coming in, going out, do you want to help start-ups get out on the global stage or what’s the vision for the international endeavours?
23:20 RM: The idea first came when the InsurTech Alliance Australia sent a cohort over last year. They came with 10 insurance companies and 10 start-ups, and we matched them up with 10 insurance companies and 10 start-ups and it was an incredibly successful event. And then out of those, two or three have come along and said we are going to open in the UK. Well, we know a lot of people we can introduce them to, we can give them some space for 6 months.
23:45 RM: So if I follow that line of inquiry then the ability to oil the wheels for other insurtech organisations inbound, I think is very powerful. And I know that those who consult in the space, who want to know what’s going on, who want access to the best start-ups, who want to be able to write strategy around what’s really going on, don’t look at what’s happening in EC3 to write that, they need to write that on a global basis, what’s happening around the world with insurance, and if we can with the drop of a hat, say to 10 organisations, “Tell us what is happening in your part of the world,” we’re going to collect that together, we’re going to pass it off to somebody else”, that’s a big extension to what we’re doing right now.
24:23 MGeo: More questions, come on, put your hands up.
24:25 Jenny: Hi guys. I was wondering, given what you’ve seen during 2018, is 2019 the year for some real traction in blockchain?
24:34 MG: The AXA Excel blockchain question…
24:40 MG: I actually was listening – Jenny – to Helen Steinway’s podcast this morning with Nigel Walsh and I think she explained it really well with the Maersk blockchain example and actually it’s one of the simplest ways that she explained blockchain, which is basically in that situation, you put data out there onto blockchain, it’s up-to-date, because Maersk put out there, that’s the right answer. But the discussion was also, do you need blockchain? And the answer is, you don’t need it but if it helps facilitate an existing solution, then go for it. But if you’ve got blockchain and you’re trying to figure out what you do with it then, no, 2019 is probably not going to be the year you’ll figure it out.
25:19 James Pool: Hello I’m called James Pool and I’m currently fundraising for a start-up.
25:22 PC: Raise your hand and we’ll take a commission if you match this evening!
25:27 PC: But in all seriousness, yes there’s been a number of people who’ve come up at the end of the evenings that we run normally and they are on their 32nd pitch who, I mean Robin you have the statistics in your head, but proper money has been raised on the back of those type of links, proper employees have been employed, the network is so valuable, so kudos to you for being brave enough to ask the question.
25:47 Christian Rufort: Hi there, my name is a Christian Rufort. I’m coming from this industry from a sideways perspective, so I haven’t been in it for a long time. And my question is about innovation. What strikes me, looking from the outside in, is that Insurtech innovation seems to be long on product innovation. As you said, Uber driver insurance for one day or a cyber security insurance, blah blah blah. But at the same time, you look at this industry and it has this fairly complex, intricate and fairly old-school value chain of different players. Actually if you look at, call it process innovation, value chain innovation, value chain disruption, there’s actually very little happening. My question is, do you agree with that assessment and do you expect that to change?
26:43 MG: Well, there’s one angle to that and Robin jump in in a minute. But part of the challenge I think, is if you look at the corporate buyers or the big enterprises and who’s buying insurance, it’s the case that the traditional buyer at a corporation is the risk manager. Quite low in the organisation, very risk averse, very little budget. Their job is to go out and buy insurance. If you really want to change the industry then you need to get the corporations thinking differently about how they’re going to buy insurance and about how they’re doing their own risk mitigation. Because without that pressure, then the risk manager is going to be ‘business as usual’. We’ve seen some examples, Maersk is one, there are a few others. But I think to really drive change from that angle, we can talk a little bit about what it means in the insurance companies. But to drive change from the outside, it’s going to require the corporations themselves to really feel that insurance is actually worth the CFO spending time on, and not delegating it down to somebody a few levels down in the organisation.
27:38 RM: There’s no room for all the people in the current value chain, there are just too many players. And Lloyd’s would be the first to admit that 45%, or whatever the latest number is, but 45% of the total premium disappears in commission before it gets to Lloyd’s. That’s a non-sustainable model, that’s a given. There has to therefore be a turf war. So the Munich Re’s of this world stand up and say right, well I’m going to start to write this stuff at source.
28:09 RM: But until that turf war manifests itself in a way that people lose a lot of business that they would otherwise have got, they’ll just carry on with the old models. That is happening faster and faster and faster, and what’s going to drive that is ecosystems. I hate the word, but it’s one of the big things of 2019. You watch people who control 100,000 customers come in and say, “I have the data, I can do insurance and I want to find a partner to do insurance with.” That data used to go through an SME broker and then on to an MGA and so on. That’s what’s going to move the dial in 2019. Ecosystems are going to say, “I have 100,000 customers, who wants them?”
28:49 MGeo: There’s time for one more at least I would say.
28:50 Audience question: Hi guys. My question is in reference to the comments on China. Why do you think that China is more likely to deliver change in 2019?
29:00 PC: So I think the Chinese market from an insurance point of view is interesting in a number of ways. One, there’s an awful lot of people. So therefore, there’s an awful lot of data for the people who like playing with data. There’s also, should we say, more lax approaches to how one can handle data. Now that obviously means things that are done there can’t necessarily be transformed into the US or Germany or the UK. But you can absolutely learn in ways that you tend not to be able to do, certainly in personal lines insurance in many of the markets we’re used to operating in.
29:29 PC: Also, insurance hasn’t existed for many people as a product in the way that it has in the UK. However much people complain about the way they buy their car insurance or their home insurance, they continue to buy it in the same way. That’s one of the challenges for start-ups, it’s just getting the consumers to say, “Oh, I’ll go and buy differently.” Rather than renewing, knowing that I’ve read in the paper that I’m paying 200 pound a year more just because I haven’t bothered looking around. When you’re starting to offer a product in a market that’s never had a product, you can do all sorts of things. And when you apply a technology overlay to that, then I think there are all sorts of interesting ideas and we need to look at which are relevant and which aren’t. But we’re daft if we continue in just trying to innovate from talking to people around us. We need to look beyond.
30:12 Audience question: On the other side of the equation, from the start-ups, who do you think is doing anything particularly interesting on the incumbent side, broker or underwriter? And in particular, is there any one beyond the sort of usual suspects that’s caught your eye recently?
30:28 MG: Yes, I think it’s been interesting to see what happens with Hyperion now they’ve launched Hyperion X and they’ve put a CEO of one of the businesses into developing that. I think you got companies like Score that are doing quite a lot beneath the radar. They don’t feel the need to want to go and talk about it. But, other than the ones that we kind of tend to talk about a lot, I think all of us really struggled. If you’re not hearing about it, then it’s actually probably not happening.
30:54 RM: You know, from our point of view, we see a lot of innovation and then we have the cases of “Can you help me? Well, this sounds like a really good idea, who do I take it to?” That’s a really tough question because there’s a secularity to that. We would take it to the people who do the very best innovating and who did the really good job on the last one we took it to. So right now, I think that’s really difficult because I’ve worked really hard on a whole bunch of smart ideas through 2018 that all came to nothing. And I’m starting to say to myself, where do I take this stuff?
31:24 RM: That’s what leads my observation that I think that it’s not quite as exciting a territory as it was a year earlier. I don’t think budgets are as high, I think that people have gone back slightly through entrenching. Most of all, I get very exercised by the idea that nobody is building a digital model of the future. Everybody’s retro-fitting lipstick on a pig and that’s non-sustainable long term. You’ve got 20 years to think about this, you know, get on with it.
31:52 MG: Just one thing to add to that. One way that anybody who’s working in an insurance company can help with is, so often we hear the story of people who are doing some great work, they’ve got a POC going, they want to go and publicise it because it helps them get other business and the company just clamps down on it and won’t let them talk about it.
32:12 MG: Whether it’s the legal department or the marketing department, or somebody else. So I guess one innovation with a small “I” would be for any of you working in an insurance company that know of some innovation and some really great things going on, please do try and find a way to talk about it and don’t just seal or put an embargo on the thing being mentioned either for competitive reasons or just some sort of over-caution from the point of view of your legal department. Because that is what supplies the oxygen for companies getting growth, if other people know that they’re working with them.
32:42 MGeo: We’re done now.
32:45 MGeo: Bring your hands together, give these people a round of applause.
32:54 MG: Well I hope you enjoyed listening to that as much as we enjoyed our discussion. We’ll be back for our next podcast episode with the second half of the evening, which became even more lively as we heard from some of the leading figures in insurance and innovation. In the meantime you can find out what we’re up to by going to our website, www.instech.london, and by subscribing to our newsletter you can be sure to catch up on the new events as they come out. Thanks to our sponsors CPP and Crowe for that evening, and also to our gold sponsors, MS Amlin and Ninety consulting.
Part Two podcast #18
00:01 Matthew Grant: Welcome to the InsTech London podcast. This is Matthew Grant, one of the partners at InsTech London and I’m delighted to have Robin Merttens, one of other partners, join us today. So Robin, three months ago, you’d never listened to a podcast. Now you are joining me co-hosting our 18th podcast. What’s happened?
00:23 Robin Merttens: Yes I’m a convert. The first thing, the Northern Line is not as noisy as it once was and secondly, there’s a lot of good content out there. I enjoy both doing them, and listening to them. And in that context, we had some very good feedback from ours the other day.
00:41 MG: So that was the first half and then we’ve got today, the second half, which we continued after the break with a number of the industry experts in there, many of whom we both know very well.
00:54 RM: Yeah well, I thought there’s nothing like hearing from the horse’s mouth and in the format of five minutes each there was a lot of insight, given in a very short period of time.
01:03 MG: And isn’t it great how people actually, who kind of just don’t need to, take the time to comment on it and to write up what we’ve done and makes it all worthwhile at the end of the day, if we get people giving us some recognition for this.
01:18 RM: Chris Williams is my new best friend. I liked his comments and I thought he contributed greatly on the night and is one of many stars.
01:24 MG: Yes, so we’re going to be covering his LinkedIn write up on the website on the event page as well. Good! Well, let’s crack on then. And so, without further ado, this is coming up now – the second half of the 29th of January podcast, talking about the views of 2018, and looking forward to 2019. From, as Robin says, some of the experts in the industry and you can also catch up on the details behind this on our website at www.instech.london.
02:02 RM: In this session, what we’re going to do is talk to some of the people that we, at InsTech London think are leading experts in their field. I want a perspective across insurance companies, startups, investors, those people who supply to the industry. So a broad section, we can see what we take away at the end. Each person gets five minutes, if it’s six minutes, I get bit grumpy. So please welcome Sam Evans from EOS Ventures.
02:32 Speaker 3 Sam Evans: Thanks Robin. Evening everybody. So by way of background, I’m sure many of you know this, but EOS is a dedicated InsureTech investor. Our limited partners as well come from the insurance sector, so we have re-insurers, insurers investing in our fund. So we have a unique perspective because we’re coming at it with an investment hat, but also working very closely with our limited partners to help them drive and accelerate their innovation strategy.
03:00 SE: So I really wanted to just share some thoughts on how we think 2019 will evolve. The first comment is a potentially severe correction in valuations. Certainly a significant one. And I know that I’m speaking from a position of self-interest here, but we really are getting to a point where valuations in InsureTech are completely divorced from reality and it’s not a helpful dynamic for the startups, certainly not for the investors.
03:33 SE: I think we’ll see a more general correction in the tech markets, but specifically for InsureTech, we need to see that connection being made between what’s realistic, versus some pie in the sky valuations. That observation links to my second comment, which unfortunately, I think we will see this year quite a number of failures in InsureTech businesses, so a number of companies that started one, two to three years ago are now really starting to, or needing to, prove that they can actually drive real value. And when you link that to valuation points, we’re already seeing a number of down rounds, businesses really struggling to raise money, given that the traction that they’re delivering with their business doesn’t match with the valuation point. So whilst it’s a shame, I think it’s a natural evolution as the sector matures, but yeah, unfortunately we’ll see a number of companies hitting the wall I think, over the next 12 months.
04:39 SE: My next observation links to the comments that were made by the panel earlier, I think we’ll see more ecosystem plays and actually for us, we think about it a little bit differently when we talk about full stack. So I think we’ll see more opportunities and value being created through initiatives that link distribution through to analytics capability, agile underwriting, digital claims and capital market solutions.
05:05 SE: We’re certainly focused on how we can drive strategic partnerships, alliances, really from the end-to-end, both in commercial line space but also in life and health and some of the more niche parts of the market. But I think we’ll see people more willing to embrace the partnership model and certainly we’ll be looking at more end-to-end solutions to drive real value for the industry.
05:30 SE: There’s a lot of discussion on the panel about incumbents and success otherwise in driving innovation. I think this year, again, we’ll start to see the gap widening. Actually, in our view, whilst we expect there will be some value transfer from incumbents to start ups, the biggest value exchange will actually be between incumbents. So those that are able to embrace innovation and actually drive real meaningful change to their business model have the ability, we think, to see a trillion-dollar shift in value between the industry.
06:03 SE: So when you think about tech adoption, it’s important to realise it’s not a linear curve. It’s exponential, so those that are doing it well, and there are a few, will really start to see the benefits of their initiatives. I think we’ll see the gap widening between those that really have the right approach and are embracing innovation to those that are paying lip service. And my final comment really relates to how we expect InsureTech and innovation to develop within insurance so as you all well know, a lot of focus on distribution personal lines, I think has been positive particularly over the last 12 months, we’ve seen more focus on commercial lines but also the core parts of the insurance value chain, so underwriting and claims, we certainly have a big focus on those parts of the value chain. In claims, we’re tracking about 70 companies at the moment that are doing different things across the claims value chain and it’d be interesting to see your claims event coming up.
07:05 SE: So for us there’s a lot of value to be driven through actually working with insurers to drive fundamental change to the core process, leveraging AI, IoT, Big Data etc and to get much smarter around underwriting, active risk management and automation of claims and we’re excited to see companies really drive that forward in 2019. Thank you.
07:38 RM: So next up we have Milan Sud from AXA. He is Head Of Innovation at AXA Partners, it’s his first time here, I’ll leave you to decide whether he comes from the insurance industry or from without.
07:52 Milan Sud: Hi everyone, so a very different experience from last time I was in this night club, albeit I’m just as drunk, no I’m not. Just a few thoughts really on 2018 and moving into 2019. So 2018…I think in this industry – and I come from the banking industry into insurance so the FinTech revolution started happening in that industry earlier than it did in InsurTech – 2018 I think was from an incumbent perspective innovation for show, and I think 2019 is, cheesy as it is, will be innovation for dough, certainly for us anyway.
08:29 MS: So 2018 was about us really working with organisations to create the environment in which we could collaborate with startup and scale up organizations so I spent the first half of the year working with various controls functions business to basically create an environment to allow partnerships and innovation to flourish.
08:50 MS: As we moved throughout the year we looked into kind of more around piloting, POCs and I think that it’s become a bit of a dirty word certainly from a startup perspective whereby there’s this view, “Yeah you’ll do a POC or pilot with us but there’s no chance that you’ll move on to scaling up that proposition.” But for me really 2019 is about how we scale up those propositions with the startups that we’re already working with, so we’ve proved concepts in 2018 some of them failed and we’re moving through to 2019 and hopefully we’ll prove that some of them are monetising and from the back end of last year we are absolutely proving that which is fantastic.
09:30 MS: The other thing I think will be a massive trend in 2019 is cross-sector collaboration, so AXA Partners – the bit of the business that I work for – is almost entirely B2B. You all know AXA is a big B2C brand but we’re operating almost entirely B2B and we white label our services for around 60% of the UK insurance market so I’m regularly meeting with lots of different big insurers about what they’re trying to do.
09:55 MS: But the thing for me is, organisations regardless of sector, are facing the same challenges, we are a necessary product. Telcos now are providing a necessary product, energy companies are providing a necessary product and therefore there isn’t any engagement or there hasn’t been engagement up to now with brands, and customers find it easier than they ever have done to switch to a new provider, there’s no loyalty whatsoever. But what we’re looking to do is take those challenges and turn them into something that’s quite beneficial for us.
10:27 MS: So if all of these organisations are facing the same challenges, we’re looking at a start-up collaboration that not necessarily just drives stuff through insurance but actually how do we create a co-developed proposition that will drive stuff into the energy sector or the Telco sector because we as AXA should be partnering with these big brands, they have the same challenges as us, if we collaborate we can bring them together.
10:49 MS: So I just want to share a little of one of the specific projects that we’re working on that really brings this to life. So one of the product lines that I sit across is Motor and Motor is a very difficult market as I’m sure probably most of you are aware, but when we spoke to customers and talking about engagement with insurance, it wasn’t necessarily the insurance they found most problematic. We tried to speak to them about their ownership of their vehicle from end to end and what they found most problematic, and we ran a series of focus groups and people said to us, “Isn’t it a real pain when you try and get your vehicle MOT’d or serviced or repaired, you turn up to a cold forecourt or to a guy who doesn’t know how to speak to you and then try and pick up your car at the end of the day to find out your MOT has failed and you owe the mechanic a grand or so he tells you.” So someone said in one of the focus groups, “So wouldn’t it be fantastic if as our insurer you could also look after the service and maintenance of our car.’
11:45 MS: Now, we partnered with an organization out of our AXA Kamet venture called Fixter who basically will pick up your car from wherever you want it picked up from, they’ll drop it off wherever you want it dropped off to at the end of the day and in between all of that, they’ll keep you up to date digitally and they have a team of mechanics in-house who will basically challenge on your behalf if any work needs doing.
12:05 MS: Now, in our business that was something that was fundamentally different, “Oh, my goodness, we’re going to go into vehicle maintenance and repair and actually we’re going to try and monetise it, and no we can’t do that because we don’t have loads of data to tell us what we should and shouldn’t be doing,” but actually we have a big brand, we’re good at building networks and we can expand our value proposition way beyond just an insurance contract.
12:27 MS: So for me in 2019 it will be collaboration with startups and scale-ups to differentiate our propositions, it’ll be collaboration with organisations well outside of the insurance sector and it will be continued evolving of our products to provide services that don’t necessarily have an insurance contract that sits behind it. Thanks.
12:50 MS: Thank you.
12:54 RM: Next up is Niall Barton, who is an old friend. So he doesn’t mind me telling this story. But the last time he was here, I introduced him as a rock star of InsurTech, and what I didn’t know was his son was in the room, and he’s been relentlessly teased about it by his family ever since. So can we welcome back our rock star Niall, come and tell us what you’re doing.
13:20 Niall Barton: Thank you. Doing a reunion tour for the nth time. Okay. So I’m not going to do a market commentary, there are plenty more people that are much more capable of doing that. I’m going to do a case study of Wrisk. There are two InsurTechs, so Eric and I on tonight, and I thought it’d be interesting to give you a window inside one of them. First we’ll do just a review of 2018 and then a look forward into 2019. I have to do it with the letter P at the beginning, so I remind myself what I’m going to talk about. First of all product. So in 2018, we became an operational company. We launched two products. One was our app, which is a multi-product app, and we launched the contents on to the app store. We also launched a motor product for BMW. So operational business very different from 2017. So performance in the three months since they launched, we’ve written about 1.2 million of premium.
14:31 NB: The App, Direct B2C really tough. So what Sam was saying about the world of InsurTech, it’s incredibly tough. However beautiful your product is, if you can’t get it out there, and people don’t know about it, it’s really tough. So, B2C for us will be really a place where we experiment, where we test things out with customers, and it helps reinforce our product, which is predominantly going to be focused on B2B2C. So as performance, in terms of partners, really up till the end of 2018 we felt we were going be B2B2C, so what VCs like to call alternative distribution. And our largest one is BMW, which we have a multi-year deal with. I’m absolutely delighted with that.
15:30 NB: But big fish are pretty difficult to come by. We have another one which we are working on, which we hope to announce quite soon. But the rest of the relationships in terms of distributing the sort of B2C products is really through these ecosystems, so partnerships. We’re working on one with the Challenger bank, with other wealth organisations and where we give vouchers to be used so that our product is available on their websites, and their apps. What we’re not doing is lots of social spend of ‘spraying and praying’. Hence, the uptake on just selling the app B2C is slow.
16:11 NB: In terms of people, we’ve got about 25 people in London and about 10 out in Rainham in Essex, who brought in the BMW account. Twenty five people in London is expensive. If you want to hire good engineers, and good designers, they’re expensive. So this is a big… It’s very challenging, building an InsurTech, I can tell you that. In terms of place, we decided as we’d rolled out our product in the UK, we needed to communicate that around the rest of world. So traveling in the US, Japan, India to just explain what Wrisk is all about, and it’s been well received.
16:51 NB: In terms of pounds, we raised a round on Seedrs as many of you may know, we raised just over a million pounds in May of last year. Seedrs has been really useful for us. We’ve raised 1.7 million in all. We’ve got 1000 investors from 28 countries, one line on our cap table, and we’ve been able to have partnerships introduced through it, staff, to find staff. It’s been a really useful way of us revealing to the general public and building ambassadors.
17:28 NB: VCs not very good for us. They love our product, but they want it later. So that’s difficult. The win for us is corporate VCs and particularly insurers. So insights into 2019, reflecting on what we’ve built…we’ve built a platform, multi-product platform, mobile first, end-to-end, and that now working across multiple products is very exciting and we realise when we ask around, actually, very few people have got that. So what’s happened now, and what’s going to be an increasing trend for us in 2019 is insurer interest. Because they know they can’t build that. We saw a CEO of a large insurer this week: “I’d love to have what you have. We can’t build this stuff.”
18:20 NB: So insurer interest is probably, I think, the biggest thing for us and establishing what our business model is outside of the UK where it will probably be some form of license, is actually where we’ll scale. So I disagree with the panel earlier that you have got to be full stack. I’ve been inside an insurer, I know how hard it is. So I don’t think that is the way that we feel that we should do it.
18:46 NB: I’m just going to do one little wild card, which I think for 2019. A number of us formed InsurTech UK not long ago, and that’s an association of just the InsurTechs. So 37 members who’ve signed up, who want to be able to talk and chat to each other, and it’s very much complementary to Robin and Matthew’s organisation here, which is brilliant. InsurTech UK is just for those InsureTechs to be able to talk together.
19:16 NB: And the view is, I think, like Robin, we want London to be a real global hub for InsurTech. We’ve got a very good regulatory body, the FCA in the sandbox, we went through that, it was very good. But it’s really difficult to get insurer capital, really difficult. And we need to solve that, and also we need to be able to attract overseas InsurTechs into this country to be able to access insurer capital. So if you think about it, who has got…
19:46 NB: Who has got home and where’s the home of innovation of insurance and who’s got oversees licenses to be able to transact insurance and who needs a big score? And I think it’s Lloyd’s. So I and a few other people are involved in, hopefully, pushing an initiative to set up an insurtech syndicate at Lloyd’s. So that’s my wild card for 2019.
20:16 RM: AON are now corporate members of InsTech London. They do so with real ambition. There are things that they want to do. To give us insight into that, Dominic come and tell us what you’re doing from your point of view.
20:38 D: I’ll say thank you very much. Good evening everyone, it’s a pleasure to be here. Hopefully, you’ve now had enough food and wine for me to gently send you to sleep.
20:49 D: So, I was recently asked by a colleague why I’d actually be speaking here, and whilst over texts I couldn’t tell if the insinuation was that I’m woefully under qualified or whether they were actually curious, it does provide an important starting point.
21:03 D: So, prior to joining AON I actually sat where many of you are sat in this room. I used to work for a fintech firm. I joined very early on as one of the first few employees and last year it was one of the fastest growing startups in London. Moving to AON meant moving from a 50-person office to a 5000-person office. And part of my role at Aon is working with an incredibly talented team on our push into insurtech. So from this speech, I’m hoping to give you a little bit more information about who we are, what we’re doing in this space, ’cause I know, I gather from our chats, that it’s not too visible, and also touch on our really exciting new partnership with InsTech.
21:46 D: So AON are one of the largest insurance and re-insurance brokers globally, but we’re also a professional services firm. So we have analytics teams, strategy consultancy teams, who work on insurtech. It’s, I think, important for me to say that we have relationships everywhere across the market in different lines and expertise in a variety of areas. The team for InsTech is cross divisional in the UK office. And it’s really a combination of the idea of AON United.
22:18 D: So what are we doing in this space? Well, insurtech is a key growth area from group level all the way down. So we have a new ventures group which was recently set up by a chief innovation officer. And the idea there is to, for the firms that we’ve bought or partnered with, to incubate them and really address some of our clients challenges. We have an Enterprise Analytics Network, so that’s leveraging our internal networks and data analytics and creating new tools, which I think will be really, really useful for the insurtech firms that we partner with. We have an insurtech working group in the UK. And the idea there is that for firms that we do partner with, we can connect you with the right person.
22:58 D: And the InsTech team in reinsurance and in endpoint, we’re working on two partnerships at the moment. One is with Startupbootcamp. I’m sure some of you would have read that in the news. And then our other new partnership, which I’m really excited to announce and be here for is for InsTech. So what are we, I suppose, hoping to achieve for our partnership with InsTech? Well, partly it’s to get to get employees from our organisation coming to events like these, engaging with you, talking to you, learning from you, and just being interested in this space, being at the forefront of change.
23:33 D: Perhaps more interestingly for some of you in the room, we’re also working with them on a series of range-finding exercises where we’re hoping to use their expertise to actually find us the right firms to partner with. Now, these are every few months and the idea is that we… Well, I suppose without giving too much away, maybe I’ll touch on our first one. Our first one will be around data and analytics. So we’re hoping to see how insurtech firms are using third-party data, or maybe public data, in ways which either create new products or innovate existing products. So, for example, you might use social media interaction to gauge reputational damage with a payout based on a parametric trigger. If you’re innovating in this space, we’d absolutely love to see you.
24:25 D: So, in conclusion, I think it’s important for me to say that from a personal perspective, and also from a group perspective, we don’t just see you disrupting the space. We really see you complementing what we do. We are definitely very aware that we are working on how we operationalize the people that we partner with, the firms that we partner with. We are very much on our own learning curve as well in this process. But I think that, and I promise I’m not paid to say this, that we’re a fantastic firm to partner with. We really do have relationships across the market. We have expertise in absolutely every area. And most importantly, we have a team which is really, really motivated now to go out there and work with you and work together.
25:11 D: So thank you so much for your time this evening. I will be around afterwards. I would love to speak to some of you. Please do come over if you’re looking at just connecting, working together, whatever it might be. Thank you so much.
25:29 RM: Thank you, Dominic. I’ve sat here and I’ve teased the brokers for the last couple of years, and I am generally thrilled that they are part of this and they will be a very good partner to work with in terms of scale and reach. Our relationship got off to a really bad start, though, because they sent me the list people they wanted to come today and I said that none of them could come because we were full.
25:53 RM: So we’re working on it, we’ll get better. Tell them to sign up quicker.
26:00 MG: So next up we have Maddie Bailey from MS Amlin from an insurer perspective, long-time friends of InsTech London. Maddie what are you up to?
26:11 Maddie Bailey: Right. Hi, everybody. So, I don’t know if you’ve ever thought about this, but humans weren’t really meant to fly. All the other animals out there that don’t have wings, they kind of just walk around. So it’s obvious, and I guess somewhat intriguing that humans are the species that are good at the change and do all the change. And I think that’s something that we ought to remember when we think about innovation in our market, that at a biological level we are absolutely hard-wired to do this. Now, I don’t claim these thoughts as my own. Those of you who came to our Neuroscience of Innovation event that we hosted with InsTech London last year, will know we spent quite a bit of time with Professor Dan Cable from London Business School, really looking at the human aspect of innovation and what that means, and what that means to our business, and how do we build that into the fabric of our organization.
27:17 MB: And I think for me, one of the biggest challenges as we’re going into 2019, both with incumbents, with startups as a market, and within this community is really to think around, “How do we really harness that and make that work for us as human beings?” Now, Dan also had another metaphor that I really liked which I think pretty much sums up where I think we are in 2018, which is we’re trying to fly the aeroplane while we’re trying to fix it.
27:48 MB: So, we’ve got to keep the business running, but at the same time we’ve got to leave enough space for innovation so that we can try new things when we might not even know how it’s going to turn out. So within our philosophy, within MS Amlin, and certainly the more radical and exploratory parts of innovation is we don’t really know how it’s going to turn out. And I think for a lot of incumbents that can be quite a scary place to be. So what have we within MS Amlin been doing?
28:15 MB: As most of you know, we set up MS Amlin Edge about two years ago. We look at innovation across three levels, tactical, radical, and exploratory. Our view is that you’ve got to be doing something in all three. The first level is tactical innovation. So that really looks at what technology is out there? What insurtech or startups could we partner with that could help us improve how we do things today? A good example of that for us within MS Amlin is our robotics process automation capability that we’ve built from the ground up being led through David Melvin. We’ve got LISA bot that’s running 24/7 helping our counter-fraud unit identify instances of fraud on a permanent basis. And that’s a really success factor for us. We’re looking at digitizing the market reform slip and how we ingest that into our policy admin system and into our data lake, and drive better data analytics around structured data.
29:12 MB: So that’s another good example, I think of tactical innovation within MS Amlin. Big shout outs to startups that we’ve worked with in 2018, specifically in the tactical innovation space. First of all, hats off to Richard Hartley and the team at Cytora. We’ve been delighted to work with you to use your risk engine to support how we do risk selection and to improve underwriter performance in our commercial property portfolio. Really, really exciting work.
29:40 MB: We’ve also been delighted to work with Concirrus, who are backed by Eos Venture Partners, to look at how we use data-driven analytics to really have a more granular view as to the behaviours within our marine. And to really start to think around how we look at migrating to a much more digital world in marine. MIS, I don’t know if Forbes is in the room, known Forbes for a long time. I’m really excited about the opportunities of imagery, particularly to support our claims proposition.
30:17 MB: And also to think around how you could use more innovative imagery use cases such as with drone technology or UAS to support that. So I think that’s also really exciting. Last but not least, I had the pleasure of seeing Erik and Anna and the team at Digital Fineprint at their new offices across the river. If you haven’t seen it, it’s a great place to go, so go and visit. Really exciting.
30:44 MB: And that’s really looking at how you can derive data-driven insights to enhance your client propositions. So again, I think a really exciting space for us. And I’m going to exert sponsors privilege and go slightly over time. [chuckle] So the next level for us is radical innovation. So that’s really thinking around how you can use innovation to really kind of shift your business model. We were delighted to take a minority stake in Envelop this year, the digital cyber MGA. And I know Envelop are in the room. So I don’t know where you are, put your hands up. I did see your names on the lists.
31:20: He’s gone.
31:21 MB: Oh, he’s gone. [laughter] So I think that’s really interesting for us because it’s taking a traditional business model, but doing something radically innovative with how you analyse the data. And we call it PC&C, which is property, casualty and cyber. So really exciting. And then of course my passion project, which is of course blockchain and our work on Insurwave, collaborating with AXA XL, Willis Towers Watson, Maersk and the dynamic team from EY and Guardtime. If you don’t know Guardtime, please take the effort to go find out what they do. They are amazing in the cryptography space. And I think that’s going to be a real interesting space for us as we go forward into 2019 and we really start to see those kind of players in the blockchain space going into production.
32:07 MB: The third level is exploratory innovation. So that’s just fooling around in the sandbox environment. The kind of work we’re doing with that is to develop our risk insights capability. So looking at how you can use supercomputing power to derive insights that could help you support your MSEs and how they manage currently uninsurable risks, like reputational risk, for example. We’re also working closely with our parent, MS&AD in Japan and across our MSI international footprint across the globe to look at how do we think about insurtech mega trains on a global basis. We’ve set up a global digital working group that meets quarterly. We’re going to Silicon Valley in a couple weeks to go have a bit of fun and, I don’t know, maybe not plug and play, but definitely a bit of fun in Silicon Valley. But it’s a really serious attempt to really sort of think around, “How do you start to leverage as a global organization your capability?”
33:05 MB: And to derive some kind of competitive advantage. Something else that’s unique for us within our group is that we have a strategic collaboration partnership with the Fairfax Group, and I think that’s another great example of where collaborating with your competitors can derive value for both both parties. And our project with MIS a great example of where we’ve done something with the Fairfax innovation arm using UAS, so I think that’s really, really exciting for us.
33:33 MB: In closing, I think, really, just to reiterate my point of view, which is around this culture and climate, is absolutely critical for this market, and I think the leadership that’s required to really drive us forward is fundamental for what we do. People think that the risk of failing or messing up by doing something new and innovative is the consequence of not trying new things, when I think really, the real risk is not doing anything at all. I think that mindset shift is really important. And finally, to all the amazing women in InsurTech in the room, and those who listen to this on a podcast, can I just give you a massive shout out, I think you do amazing things. I saw Jenny from AXA XL, Helene, all the others, I think you’re great, please keep on carrying on and driving us forward. And that’s it for me.
34:37 RM: For those of you who want to know how you get an extra couple of minutes, you pay 25 grand a year to be a Gold Sponsor, and you can speak for long as you like.
34:44 RM: Okay, that’s how it works. We’re not stupid.
34:50 RM: Talking of which, our new Gold Sponsor for this year is Ninety Consulting, they’re an insurance product design agency. To tell us what they’re up to and get their insights into corporate product innovation, here’s Tom Hardcastle. You haven’t got quite as long as Maddie, she paid last year as well.
35:13 Tom Hardcastle: Thank you, Robin. We’ll exercise our privilege in another event. Yeah, so, Tom Hardcastle, I’m a partner at Ninety. We are a consulting organisation and practitioners who help insurers, so help incumbents innovate and thrive. Some reflections, then, on 2018, three reflections, and then some predictions for 2019 that we can replay in a year and see how wrong they were. So the first is, in terms of 2018, digital services growth. The panel earlier was, I think, a little bit negative in terms of seeing some of the adoption of digital, particularly in personal lines, and the growth from what was originally quote and buy only to mid-term adjustments, renewals, claims, and overall customer interactions. Now, up to two-thirds of all customer interactions are digital and digitized. If you like, the learning from 2018 is the customer appetite’s absolutely there. The usability is improving all of the time, particularly smart FAQs, chatbots, and the like. And we are now seeing this spread through from personal lines to commercial lines, both SME and larger corporates as well. And so we will see this become the norm. Albeit it’s been a slow burn, but we are seeing traction now.
36:23 TH: The second is around IoT, and that is now starting to move into the mainstream, whether that’s connected cars, or smart home. Although there’s still a way to go, we see some significant partnerships that took place in 2018, the likes of Aviva’s major shareholding in Neos, for example, but also the ability to sell smart home kits and also insurance and risk management information services through the likes of Amazon, so to be able to buy a whole package, now that is available. And also elements of autonomous vehicles and their capabilities starting to play into services and propositions. Okay, it might not be the full autonomous vehicle yet, but some of the elements that are there are playing in.
37:04 TH: The learning is, we are starting to get some traction there, customers are seeing the benefits, and we’re also seeing a growing service offering, which isn’t just on price here, as we get closer to the risk actually being underwritten, and a move, over time, to prevent rather than protect. And the third thing from 2018 that we’re seeing is actually innovation spreading. Again, perhaps more positive than the panel earlier, because as Ninety, we are closer to insurers that want to do this and the parts of their business that are doing it, but we are seeing disruptive, new and innovative ways of thinking taking place, both in, perhaps with the usual suspects, but also in the darker recesses that were perhaps forbidden or out of bounds previously. And so we see that’s more positive, and new ways of processing, of administering, new propositions themselves coming to market, and improvements, both in expense ratios from an internal perspective, new revenue growth, but also this overall theme of customers taking greater control.
38:06 TH: That’s the view of 2018. Looking forward to 2019, what are the things we see? Three. The first is, for incumbents, that there’s greater value given to exploring, so corporates are now placing greater value and appetite on experimentation, and it’s getting into the zeitgeist of organizations, recognizing still there’s a way to go, and an MVP mindset of, “Let’s test that minimum thing, let’s really focus the idea down,” rather than all in starting to prevail, and a focus on user needs as well, and unpacking what the value chain looks like.
38:38 TH: The panel earlier said, potentially, there are too many players in the value chain, but understanding who the end-user is, the actual policy holder themselves, and then all of the pieces of the chain playing there. And rapid decision making also starting to play in alongside this exploring in order to design and prototype quickly, or to fail fast and take the learns. The trend is really this removal of the shackles of inertia that were previously there and of a corporate governance burden, and an openness to new approaches and also partnering combinations as well.
39:12 TH: And so the second link to it that is this best of both mindset. So, corporates and startups and combined strengths rather than seeing themselves as rivals, and it plays to the them earlier of ecosystem. So we see better engagement, better on-boarding of start-ups, slicker on-boarding, good start-ups to actually work and test ideas. The convergence of new data in all data are incumbents with a lot of history. New start-ups with new data and new ways of looking at things, and actually how do we work the best of both. And also the opportunity to actually balance the skills of startups and incumbents.
39:49 TH: So for example, Travelers playing third-party claims administrator for the ride-share start-up firm Lyft. So the trend is more combined, rather than competitive, which I think shows the maturing that we’re seeing there. And the final theme is that of loyalty and personalized services. So a growth in rewarding customer loyalty in a much more personalized way. Insurers using the data that they have to underwrite risk to actually better understand why customers are loyal to their organization and incorporate these learnings into products and services. So we see that that’s starting to play out in the growth of personalized services as well. The likes of aggregators such as compare the market offering there. AutoSergei, AutoMeerkat which has started it with regard to energy price checks in order to make sure customers are getting the best deals but will soon move into insurance and will also deal with your previous insurer if you’re looking to move.
40:43 TH: So you can see this offer of one place for all for servicing not just for insurance, but also for ancillary services around home repair, maintenance services, and so on. And so insurance, surprisingly, could become a more high engagement product or proposition for the customer. So the trend there is very much about taking the effort away from the customer and really replacing it with both value-add services and potentially higher engagement as well as part of a broader ecosystem. Thank you.
41:18 RM: Tom, thank you. Those guys that are right at the front end of innovating in many of the larger organisations. So, good insight. Erik Abrahamsson, a long time friend of InsTech London come and tell us what your start-up journey has been like the last couple of years going forward.
41:40 Erik Abrahamsson: Thank you. Good evening, everybody. I’m Erik Abrahamsson. I’m founder and CEO of Digital Fineprint or DFP. And when I look at back at 2018 I think there are three big trends that are continuing into 2019 that I’ll share with you. The first is that the start-ups are becoming scale-ups, insurers are going from being reactive to proactive, and we also see a move that’s been mentioned before, from only personal lines innovation to commercial lines. If you look at the start-ups last year a lot of them started growing exponentially. We saw Concirrus getting some great traction. As you mentioned before. Casco expanded into new markets bought by many, did Series B funding, first one here in the UK. So we see a lot of big traction happening.
42:20 EA: In our case, we tripled the team, went into new markets. It is an exciting time to be running a company in this space. We think it’s going to continue, especially driven by the investments that insurers are making in this space. There are now 63 corporate VCs run by insurance companies. On average, they have 100 million USD to deploy in terms of capital and most of them focus on Series A. So that means that many of them are deploying capital in that slightly later stage, not just angels, seed Investment. There’s actually less investments in that space and more on the Series A, so we’re going to see that continuing, that’s our prediction.
42:55 EA: Second is that insurers some of them used to be proactive, they try to engage, we see an AXA partner as one example. Hiscox futures used to be out taking coffee with loads of startups and companies but now in 2018, we saw others like MSAmlin running the Insurwave initiative, QBE and others became much more proactive, and we do see that as an organization. We get more inbound requests, more things are happening. The brokers are getting engaged in this space, as well.
43:23 EA: And that proactive nature key if we’re going to be able to create strong partnerships. As a provider, if you will, we have to spend a lot of time pitching in to insurance companies and we love it. It’s much fun, but it’s also great when it happens the other way. So going from reactive to proactive becomes extremely important. We think we’ll see that with some more strategic investors like EOS Venture Partners helping companies like ours to do that in a better way and be able to manage that transition will be extremely important.
43:53 EA: If you look back a few years, the first couple of companies that came in this space, the lemonades, Trovs, and other amazing examples tended to focus on personal lines, and I think that was because most people could connect to it in an easier way, you could understand the process and the product. And therefore, a lot of innovation happened, there in the early days. After a while, however that started becoming more of a used up space, new ideas had been tried out and the companies kind of ran their course. We saw that with Neos, AXA being acquired by Aviva. So, they’ve run the course around the entire development of a start-up.
44:28 EA: That hasn’t happened yet in commercial lines, and that’s by far the biggest trend we saw in 2018 with new innovations being launched there, new companies. We tried to do both personal lines and commercial lines and it almost broke the organisation in half, then we focused down on commercial lines and SME and everything started working. So, finding an untapped opportunity where things haven’t happened yet, became a much better strategy forward. We’re probably going to see much more activity in this space. We see more companies like Next Insurance in the US making great inroads in the commercial insurance space, and because there’s so much work to be done we see potential for many great things happening there as well.
45:08 EA: In terms of what’s going to happen and not change in the future, there are certain things that will remain true even at the end of this year. I feel that insurance technology and insurance in general is really a team sport. It’s still built on relationships. We’re still meeting person to person all around. And that’s extremely important and we shouldn’t forget about it. That’s why networks like this are so important. That’s where people can meet each other, exchange ideas and try out new things.
45:32 EA: And I’m extremely happy to hear that there’s now an international component and strategy behind InsTech London becoming the InsTech of the world, if you will. If we can do that well, if we can create London as a strong ecosystem in the middle of the world, then many great things can happen, both for the companies in this space, for the insurers, and ultimately for the end consumer.
45:53 EA: So those were the three big trends. Startups are becoming scale-ups. Many of them growing very quickly. We see much more of a move from a reactive approach to proactive approach for the leading insurers and brokers in the space. And we also see much more innovation in the commercial lines of insurance. Thank you so much for listening. Let’s grab a drink later. Thanks.
46:15 RM: So you can’t have an event like this without having Munich Re Digital Partners at the table. I think they’re doing more than anybody, and risking more and trying more. So to tell us what they’re up to, Saadhvi Khullar, come and tell us more about it.
46:37 Saadhvi Khullar: Thank you very much. So, I’m Saadhvi Khullar. I am the European Portfolio Manager for Munich Re Digital Partners. You’ll have to bear with me, I am a last-minute stand-in. So I do apologize, I do have my notes. So a couple of the startups who have been on stage, rockstar Mr. Niall Barton, team Wrisk, BBM, Trov, all of the big deals who you’ve mentioned, I have had the privilege of working with them and believe me, being in this space makes me feel beyond privileged. I just think it’s wonderful, which I feel I should mention ’cause I am freaking insurtech all the way.
47:13 SK: So, in terms of kind of my reflections for 2018, so, I guess two things really, really jump out at me. Firstly, I’m a portfolio manager, I deal in projects and one of the things that I started seeing a lot of is that for the tech components of our various projects, the tech solutions were actually being provided by the Insurtechs themselves. So this concept of sort of platform as a service, whether it’s Slice, Trov, etcetera, is becoming more and more prevalent. And these guys are leveraging that sort of, sorry, pivoting kind of their business models, if you will, to launch really, really elegant platform solutions.
47:56 SK: After all these guys know insurance, they know the compliance, the regulatory, the whole shebang of the insurance world. And what they’re launching and then licensing to other users is stellar. So that for me, really jumped out as one of the key things of 2018, sorry, which was almost a by-product, but a really great by-product nonetheless. The second reflection of 2018 was this concept of variations in offering. So in my head, rather simplistically, I believe that initially when insurtech started, there was this wave of revolutionizing the customer journey and to digitize it, to tweak the product slightly to make the offering more compatible with the way that our consumers are now ingesting insurance, but I think that has been done. It’s been done really well, but I think it’s been done enough.
48:56 SK: So, the startups who are scouts we were meeting and seeing, they’re almost repeating this art of perfecting the customer journey, modifying the product and I think that was getting a bit sort of status quo. On top of that, what was happening is incumbents were upping their game by way of, their front-end technology stacks were starting to look a lot sharper, they were bringing all of, basically all of the customer journey enhancements into one line. So one of the things that jumped out to us, to Digital Partners team was, we were kind of waiting to understand who’s going to do the second wave? Who’s going to do something actually useful with data? Who’s going to take machine learning and kind of change it from a buzzword into actually something? And who’s going to take AI and kind of do AI with purpose? So actually rather than creating like a solution and a problem in one, actually find a proper problem and solve it with AI. So, I guess that was my kind of second theme of 2018, which leads into 2019. But what’s the next kind of wave of these Insurtechs and who’s going to kind of be leading the pack in that respect?
50:16 SK: In terms of my prediction for 2019, I’d say it’s OEMs and large distributors. So when I think of the people who’ve been coming through the door at Digital Partners, we have had a lot of interest from these large distributors and gradually I think that they want a slice of this insurtech pie. And I think it’s largely…
50:40 SK: I’m going to go with thinking on the positive. I think it’s because they want to engage better with their customers, and they understand the fact that the guys sitting in this room, and within the community are doing such a great job of working through the customer journeys and providing that synergy with what is now our end consumer, our millennials, whichever generation you want to call them. So, I think in essence, that the B2B2C model will get a lot more airtime. And I think overall, the traction that we’re going to gain with these OEMs and large distributors is perhaps, I think going to be quite a prevalent theme within 2019. And we’re overall fortify and make stickier the proposition for these larger manufacturers. Thank you very much for your time guys.
51:36 RM: Thank you all. A really big thank you to our speakers. That was a fabulous session and some really, really good insights. The next one is March 5th, we’re going to talk about claims. Anyone who wants to come to the Gen Re Life and Health event where Alex is, let me know. That’s 19th of February, but it’s invite only. So you’ve got to drop us a line. And again, thank you all for coming and staying and we will see you again soon. Thank you.