We continue the story with Risto Rossar, CEO and Founder of Insly, to discuss his predictions about the insurance market in 2021. This time, the focus is on insurance products and distribution models, and money– how will IT expenses be allocated and which insurtechs will attract more investments. Also, we’ll shed some light on what Insly has in store for you this year. Without further ado, let’s get to it!
How do you see the role of insurance product development and service design in the new reality? Will there be a boost in launching new products for niche markets or will generic products for mass audiences prevail?
Product creation and design are clearly defined by the market. That’s why mass products, like insuring cars or health, will still prevail. Although, we will see the rise of niche products in a globalising world since products are not limited to country borders and will have a stronger ground for expansion.
For example, offering insurance products to sharing economy service providers, like Bolt, Uber, or Wolt drivers within a country is dealing with a niche market. The market share inside one country might be relatively small, but when providers can insure their business globally, in a certain region, the market becomes attractive for investments and big enough to build special products.
The chance to offer insurance products in a geographically larger area creates preconditions for providing niche products on a wider scale.
The chance to offer insurance products in a geographically larger area creates preconditions for providing niche products on a wider scale. And, as our lives change, niche products could become mass. Overall, with the help of technology and globalisation, we will see an increase in niche products. That will have a positive impact, since problems which could not be addressed inside the country’s borders will find a solution thanks to a bigger market share for these specific products.
What will the future of insurance distribution be like? Will we see changes in the distribution models?
Distribution channels are not eager to change. If people are used to buying insurance in a certain way, e.g. from the internet or through agents or brokers, it’s not something to alter easily. Until now, even the adoption of technology hasn’t had a considerable impact on the picture. As they say, old habits die hard.
If people are used to buying insurance in a certain way, e.g. from the internet or through agents or brokers, it’s not something to alter easily.
I believe that the goal for all distribution channels is to simplify purchasing insurance as much as possible for the consumer. Winners will be the ones who succeed. And this is where technological solutions play a vital role.
I don’t feel like I am in a position to forecast what consumers will expect from an insurance product or a buying process in the future. Would they prefer “Netflix of insurance” where everything is covered in a subscription fee; would they like to buy a TV from Amazon and get insurance as an additional cover; or would consumers like to choose insurance for each item separately and select risks by themselves. It might as well be something completely different.
As we live in a changing world where everything is measurable, my suggestion for insurers is not to predict the future, but to test different products and let the customers choose their preferred solution. So, AB test with several products and channels, fail fast and build a continuous feedback loop into your insurance product development. With modern technologies, that is doable at reasonable costs.
Where do you think insurers and brokers will allocate most of their resources? How do you think insurance companies’ IT spend will change in 2021?
Insurance companies’ IT budgets are largely written in stone. When you have 95% of your costs planned, there is quite little room to play with. The main allocations will be to maintain existing solutions, but I believe we can expect an increase in IT costs. There is a trend towards automation tasks and replacing labour with technology.
The more insurers understand the need to change, the more they must invest in technology to survive in the competition.
The more insurers understand the need to change, the more they must invest in technology to survive in the competition. In that sense, the competition is weak, because entry barriers in the insurance industry are extremely high. In the mid-long perspective, insurers feel pretty safe – it’s not easy for new competitors to emerge, since the capital requirements for entering the market are hindering it. In general, the more an industry is protected by barriers, either regulative or capital requirements, the less innovation and competition there is. This is a clear limitation, but not an obstacle.
We can see, though, those insurance providers have started outsourcing more and cooperating with start-ups. 5 to 7 years ago, all technology-related questions were handled in–house or legacy systems were implemented. Remember the saying, “you can never go wrong, when you buy IBM?” Fortunately, market openness and possibilities for cooperation have improved.
What do you predict regarding the funding of insurtechs? Which type of insurtechs will attract more investments in 2021?
I see two clear trends in funding:
- B2C start-ups that sell a specific insurance product in a simple manner;
- solutions that improve the performance of existing insurance providers.
I explained the first category when I talked about challenges for insurance providers. In the latter, there are two types of companies: the ones who provide full-stack policy digitalisation, like Insly, and the ones who address specific problems, e.g. certain type of claims handling (travel, home, or casco), which are effectively solved with the help of technology or AI. So, insurance providers take their software module and integrate it into their general insurance administration system. The more advanced technology we have in our hands, the more specific the solutions will be. For example, even taking photos of your car to determine the damage before insuring it is an existing solution.
Insurance providers realise the need to implement modern technologies and investors realise that start-ups who solve their specific problems are worth investing in.
I’m trying to say that we have solutions for even the smallest fragments of the insurance process. This is a relief for insurance companies because they will never build all these systems themselves. Insurance providers realise the need to implement modern technologies and investors realise that start-ups who solve their specific problems are worth investing in.
Your company, Insly, is at the forefront of providing advanced technology for making insurance processes seamless and easy. What are Insly’s main goals for 2021? What do you have in store for your customers?
Insly’s ultimate goal is to provide a full-stack no-code platform that will not only speed up the time to market for selling new insurance products, but also offer back-office accounting and claims handling capability in a modular way.
We’ve been working hard for years to develop our new no-code platform. It has already started to pay off, since building insurance products has been made accessible even to companies with small IT budgets. We have decreased the entry investment to a minimum and created a flexible monthly subscription plan. This removes a huge barrier to new entrants and product creation, and will, hopefully, diversify the insurance market and foster innovation.
What are your expectations for 2021?
This year could bring us something positive, in contrast to 2020. I expect people to understand that our life is more complicated than a single variable equation. We need to acknowledge that our existence is complex, and we cannot fight nature and the cycle of life and death. Mankind must realise that it’s not justified to address one problem at a time and do whatever it takes to decrease the number of people infected by COVID-19.
I sincerely hope that fiscal policy won’t mess up our society – we see the concentration of wealth and transfer of money from the poor to the rich. This could, in the worst-case scenario, end up in a revolution.
Due to the coronavirus, behaviour of giant technology companies, and money printing, we are on the verge of a breaking point. We can only hope for the new normality to be better than the current, we can just keep our attitude and mind open towards changes.