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Time for the Insurance Industry to get Tech

21 September 2015|by Joe Gardiner

insurance-tech

For a comprehensive overview of UK fintech investment data, take a look at our guide.

Writing last week for City AM, Rob Moffat toasted the success of the UK FinTech industry. And, according to his article, it’s flourishing – generating £13bn in revenue annually, and attracting £3.5bn of investors’ cash to date. But that’s not to say more couldn’t be done. Indeed, Rob bemoaned a dearth of insurance companies embracing tech – an area he feels is ‘an obvious target for disruption’.

And we agree. The colossal insurance industry, worth trillions of dollars globally, is ready for innovation. So why hasn’t it happened yet? 

Well, certain spaces within the insurance industry have been employing tech for some time. Many car insurers, for instance, have been adopting the black box approach – a small telematics device which relays data concerning driver safety and mileage – to inform policy premiums. And plenty of insurance comparison platforms have emerged around the space too. Cheshire-based Wejo operates an online car insurance comparison platform and is currently developing an app. The fast-growth start-up has completed two undisclosed deals since its inception in 2013 – the most recent of which our researchers discovered to be for £1.78m, giving the company a pre-money valuation of £11.3m. 

But it’s not just cars. Whilst Moffat points to The Floow, and Bought By Many as companies disrupting the space, we’ve found other exciting start-ups in the sector. London-based Elliptic provides an insured Bitcoin storage service, and in July 2014 completed a $2m venture-stage equity deal with Octopus Ventures and an undisclosed business angel. Quotall has developed software for insurance brokers to sell their products directly to customers. The London-based start-up has completed 4 undisclosed deals, and in early August secured £300k in exchange for a 10.4% equity stake. 

Still, it’s not as though the market is inundated with insurance-tech companies. It’s likely, as Moffat suggests, that high barriers to entry are the problem. EU legislation requires high capital reserves for any organisation to be classed as an insurance provider – an attribute most start-ups intrinsically do not possess.

That, though, could be about to change. A recent survey by Interim Partners, found that 33% of insurance executives felt tech was the best way to generate profits. Perhaps with increased backing from such executives we could see increased collaboration between traditional insurance firms and dynamic start-ups. 

But it’s not all plain-sailing. The survey also revealed that insurers feel customer profiling – including social media monitoring – is one of the tools driving the industry forward. Here at Beauhurst we do love our data, but use of social media monitoring opens a whole new can of worms. Beauhurst-tracked credit-rating companies such as Lenddo and Friendly Score operate similarly, using social media monitoring to inform their decisions, but if this is part of a systemic shift it could drastically impact the way we use social media. It could wreak havoc with people’s perceptions of their public and private lives, and it may see millennials, in particular, wishing they hadn’t been tagged in that photo. We’ll be keeping a close eye on the development of insurance-tech ourselves – stay in the loop by joining the Beauhurst Bulletin

 

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