Application of AI, Insurtech and Real Estate

Technology
Introduction to Insurtech

Professor Christopher Geczy, PhD

 Introduction to Insurtech

• The insurance industry is global and diversified across applications and

subsegments
• Gross Written Premium (GWP) was $4.8 trillion in 2017*
• The amount of insurance written, not including commissions and costs
• Net income worldwide grew 23% last year, vs. actual growth of 14% in
2017*

* Ernst & Young, “Global Insurance Trends Analysis 2018,” June 2018.

5
 Introduction to Insurtech

• The insurance industry needs to respond to technological change & disruption

• Wearables
• Driverless vehicles
• Internet of Things
• “Big Data”
• Natural language processing
• Blockchain
• Distributed ledger technologies
• Climate change
• Etc.
• New technologies offer opportunities to increase efficiency in the industry and
serve new markets
* Ernst & Young, “Global Insurance Trends Analysis 2018,” June 2018.

16
 Introduction to Insurtech

• There is no standardized definition of insurtech

• It is said to be revolutionizing the insurance industry and changing the way
insurers do business

* Milken Institute, “InsurTech Rising: A Profile of the InsurTech Landscape,” December 2018.

18
“ InsurTech can be described as “an insurance company,
intermediary, or insurance value chain segment specialist that
utilizes technology to either compete or provide valued-added
benefits to the insurance industry.”
- SIA PARTNERS, 2016
 Key Emerging Technologies Leveraged by Insurtech Companies

Source: Capgemini World InsurTech Report 2018

20
Application of AI, Insurtech and Real Estate
Technology
Emerging Technologies: AI & Machine Learning

Professor Christopher Geczy, PhD

 Key Emerging Technologies Leveraged by Insurtech Companies

• Artificial Intelligence
• A descriptor for software which can perform functions ordinarily
associated with human reasoning
• Iterative learning
• Self-awareness & emotions
• Insurers hope to exploit AI for chatbots
• Allstate’s Allstate Business Insurance
Expert (ABIE)
• Provides answers in real time to
customer owners' questions
• Other insurers have followed
Source: “What Is Insurtech and How Are Insurers Using It?”
https://www.thebalancesmb.com/what-is-insurtech-4584490.
Graphic: Accenture presentation: “Accenture’s 2017 Technology Vision for Insurance.”

37
 Key Emerging Technologies Leveraged by Insurtech Companies

Machine Learning
• Enables computers to "learn" over time
• Using algorithms & mathematical models to simulate neural networks in the
human brain
• Allows computers to extract patterns from raw data rather than following
specific instructions
• Gives the appearance of being closer to the activities of the human brain
• Some insurance companies amass large amounts of data
• Yet, according to the National Association of Insurance Commissioners,
most insurers use only 10 to 15% of the data they collect

Source: “What Is Insurtech and How Are Insurers Using It?”

https://www.thebalancesmb.com/what-is-insurtech-4584490.

44
 Key Emerging Technologies Leveraged by Insurtech Companies

• Machine learning could allow insurers to mine their data more effectively
and extract valuable information
• Risk modeling: Analyze claims data to predict the risk of future losses
• Demand modeling: Predict demand for their products in the future and
to estimate premiums
• Detecting fraud: Identify patterns of behavior that aren't obvious to
human adjusters
• Processing claims: Automate claim reporting and processing
• Underwriting: Help underwriters analyze data collected from applicants.
• Computers can aid in the decision making process, flag risks or
inconsistencies in data that underwriters might not be able to see
• Can also check external sources such as social media to verify the
accuracy of the data Source: “What Is Insurtech and How Are Insurers Using It?”
https://www.thebalancesmb.com/what-is-insurtech-4584490.

52
Application of AI, Insurtech and Real Estate
Technology
Redefining the Insurance Industry

Professor Christopher Geczy, PhD

 Redefining the Insurance Industry

1. Product Design
2. Selling & Marketing / Front Office
3. Underwriting
4. Policy Administration
5. Claims Management

58
 Insurtech Are Redefining the Insurance Industry
Policy Claims
Product Design Front Office Underwriting
Administration Management
Marketing,
Actuarial Models and Underwriting Policy Acquisition Claims Servicing
Distribution and
Product Design New Policies and Servicing and Payout
Channel Management
• 360° view of • Extended multi- • Real-time • Segment the market • Streamlined claims
customer’ needs device & mobility information based on servicing process with low
• More personalized offering capturing desires waiting time
product designs • Integrated • Advanced risk • Automated systems • Instant notification of
• Design new omnichannel analytics enabling with Straight the claim &
products offerings & touch risk-based pricing Through Processing proactive status
• Adjust products in points • Automated workflow (STP) capabilities updates
real time • Real-time updates & management & rules • Automated , • Real-time claims
• Disaggregate interactions with engines premium reminders status monitoring
product mix clients • Customer value-led and renewal notice • Advanced analytics-
seamlessly • Quick identification promotions & • Anytime access to based fraud
• Design and deliver of cross-selling & discounts policy details/view detection
products to the end up-selling • Digitized systems
customer they want opportunities with less reliance on
• Detecting client data that a customer
satisfaction needs to provide
• Information
availability & price
transparency
Source: Capgemini World InsurTech Report 2018

63
Application of AI, Insurtech and Real Estate
Technology
Classification of Insurtech Companies

Professor Christopher Geczy, PhD

 Segmentation of Insurtech Firms

• There are different classification methods for InsurTech firms and

initiatives, but they rotate to similar concepts:
• A “traditional” view: Full-stack / Agents / Brokers
• A nuanced view of sub-segments: Carriers / Enablers / Distributors

67
 Segmentation of Insurtech Firms

• Milken Institute has three main classifications:

• Full-stack Insurers: Platforms that underwrite policies, assume the risk,
and, in most cases, manage the process from beginning to end
• Agents: Platforms that act on behalf of a carrier, essentially acting as an
extension of an incumbent carrier
• Brokers: Platforms that provide customers with a variety of policies
offered by both incumbent carriers and insurgent InsurTech platforms
• May or may not be paid commission based on the policies sold
through their platform
• May require customers to scroll through policies offered or
automatically connect customers to a preferred policy through
algorithms employed & based on a user’s response to a set of
questions
Milken Institute, “InsurTech Rising: A Profile of the InsurTech Landscape,” December 2018.

68
 Segmentation of Insurtech Firms

• To make the classification:

Yes: It is an insurer

Is it a full insurance One: It is an agent

company?
No: Is it partnered with
one or multiple
insurance companies?
Multiple: It is a broker

Milken Institute, “InsurTech Rising: A Profile of the InsurTech Landscape,” December 2018.

69
 Classification of Insurtech Firms: Capgemnini

• Second classification system, used by Capgemini

• It categorizes InsurTech providers by their role in the distribution chain:
• Enablers
• Distributors
• Full Carriers

Source: Capgemini World InsurTech Report 2018

70
 Classification of Insurtech Firms: Capgemnini

Source: Capgemini World InsurTech Report 2018

71
 Segmentation of Insurtech Firms by Model

InsurTech Platform Models

35

30
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Number of InsurTechs
25

20

15
18

10 12

0
FUL L STACK AGENT BROKER

InsurTech Platform Models

Milken Institute, “InsurTech Rising: A Profile of the InsurTech Landscape,” December 2018.

72
73
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InsurTech Landscape,” December 2018.

Milken Institute, “InsurTech Rising: A Profile of the
 Segmentation of Insurtech Firms

• A significant portion (approximately 40%) of Insurtech companies could

better be described as technology solution providers
• Human Resources and Earned Benefits Solution Providers
• Data Solution Providers
• Infrastructure Solution Providers

Milken Institute, “InsurTech Rising: A Profile of the

InsurTech Landscape,” December 2018.

81
 Segmentation of Insurtech Firms

• Human Resources and Earned Benefits Solution Providers

• Platforms using or deploying technology to help firms manage their
human capital more efficiently and cost effectively
• Data Solution Providers
• Platforms that specialize in collecting, aggregating, and/or analyzing
vast quantities of data to support (re)insurance carriers, startups, and
other stakeholders
• Infrastructure Solution Providers
• Platforms that focus on making back-end processes more efficient
through the use of application programming interfaces (APIs) or that
provide the means by which platforms can integrate and/or build
customizable insurance products and services Milken Institute, “InsurTech Rising: A Profile of the
InsurTech Landscape,” December 2018.

87
 Number of Technology Solution Providers in Insurtech Market
Insurtech Platform Models
15.5

15
15 15
14.5
Number of Providers

14

13.5

13
13
12.5

12
Human Resources and Data Solution Provider Infrastructure Solution
Earned Benefits Solution Provider
Provider - Small, Mild,
Large Businesses

Milken Institute, “InsurTech Rising: A Profile of the

Type of Tech-Solution Providers InsurTech Landscape,” December 2018.

88
 Examples of Full-Carrier Insurtech Firms
Insurtech Firm
Products/Services Offered Example
Type
ZhongAn is a Chinese property insurer that uses
Traditional insurance model
Digital Carrier the online channel to sell its products and handle
conducted online or on mobile
claims
A risk-sharing network where a
group of associated individuals pools insPeer, a France-based community insurance
P2P Insurer their premiums to insure against risk platform, allows members to pool in money within
Full Carriers

and generally stands to benefit a group for covering a group member’s deductible
regarding premium returns
Smaller insurance packages with Leveraging mobile technology, BIMA offers
Micro Insurer lower premiums and typically lower affordable insurance products to low-income
coverage populations in emerging markets
On-demand insurance coverage that New York-based Sure offers on-demand personal
On-Demand Insurer can be purchased online as well as or episodic policies that a user can buy either via
via mobile apps website or an app
US-based Metromile offers auto insurance with
Usage-Based Premiums prices per usage or risky
fees based on the number of miles the insured’s
Insurer behavior displayed by the customer
car logs
Source: Capgemini World InsurTech Report 2018.

99
 Examples of Full-Distributor Insurtech Firms
PolicyBazaar specializes in comparative analysis of
Online site enables individuals to
Marketplace products from various insurers based on price,
compare plans from different insurers
quality and key benefits

Artificially intelligent insurance advisory application

One-stop app(s) allows customers to
Brolly delivers contextually relevant insights
Personal Financial manage all their policies, obtain
through web and mobile applications, so customers
Assistant coverage recommendations and
can manage policies in one place and know where
compare and purchase plans
Distributors

coverage may be duplicated or missing.

Online platform allows customers to Licensed broker Coverfox offers insurance products
Digital Broker
compare and purchase policies for vehicles, home, health services and travel.

Online site enables commercial CoverHound, a US-based InsurTech firm that offers
B2B Digital
customers to compare plans from a comparison platform for personal and small
Distributor
different insurers commercial insurance products.

London-based Bought By Many uses social media

Customized or flexible front-office data to connect people with similar insurance needs
Value-Adding
solutions via partnership with an and then uses the group’s collective buying power to
Intermediary
insurer/reinsurer for risk management negotiate with insurers for deals that aren’t available
for individuals.
Source: Capgemini World InsurTech Report 2018.

109
 Examples of Full-Enabled Insurtech Firms
PremFina’s white label solution for brokers allows
Front-Office Solution Process-improvement solutions for the
them to extend premium financing options to their
Providers front office
customers and manage insurance policies.

RiskGenius applies artificial intelligence to streamline

Policy/Plan Process-improvement solutions for the work of insurance professionals by retrieving
Management underwriting and policy/plan details on a specific coverage or exclusion, analyzing
Solution Provider administration policies and extracting relevant information such as a
premium limit or deductible.
Enablers

RightIndem has a white-label self-service insurance

Claims Management Process-improvement solutions
claims platform for insurers that allows customers to
Solution Provider specifically for claims management
interact with their claim in their own time.

Carpe Data leverages fata from various channels

such as online content, social media, connected
Data capture or analytics solutions for
Data Specialist devices and offers predictive scoring and data
use cases or across the value chain
products for the insurers, enabling them to predict risk
better.
Solutions based on a specific
Technology Betterview, a drone-technology specialist, allows
technology such as blockchain or Source: Capgemini World InsurTech Report 2018.
Specialist drone-based inspection or property assessment.
drones
Source: Capgemini World InsurTech Report 2018.

110
Application of AI, Insurtech and Real Estate
Technology
Investment & Market Size of the Insurtech Industry

Professor Christopher Geczy, PhD

 Insurtech: Market Size

• What’s clear is that it’s large and growing

• Global Insurtech market revenue $532.7MM as of 2018*
• Market revenue expected to reach $1.2 billion by 2023 (+16% CAGR, 2018-
2023) *
• AsiaPacific will have highest regional CAGR, growing in financial hubs in
Hong Kong/Singapore/India
• Health insurance segment is expected to have the higher segment CAGR*
• Total Insurtech investments, 2017: $3.2 billion **
• Total deals, 2017: 202 deals for $2.2 billion
• 83% involved an insurer/reinsurer as investor **
• Estimated 5-year CAGR, 2012-2017: +45% ** *Orbis Research, “Global (Insurance Technology) InsurTech
Market Size 2019,” Dec. 2018. **Ernst & Young, “Global
Insurance Trends Analysis 2018,” June 2018.

120
 Size of Insurtech Market
258

Global private investment $12.3 242

(VC, PE and M&A)

$10.3
in insurtech
2013-2018 164 165

114

89 $5.7

$4.0

$2.4
$1.6
2013 2014 2015 2016 2017 2018

Capital invested ($B) Deal count

Source: KPMG International: Pulse of Fintech 2018,
Global Analysis of Investment in Fintech, January 4, 2019

121
 Insurtech: Startup Count

Number of Insurtech Startups Exploded Over Just 2 Years

(Source: SMA – Strategy Meets Action, 2017)

122
 Insurtech: Disruptors
The Top Insurtech Disruptors

123
 Insurtech: Key Techs

• More and more insurers are moving key business functions to the cloud*
• Tech research firm Ovum’s annual survey of penetration of Software as a
Service (SaaS) grew from 13% in 2016 to 26% last year

* Source: Ovum survey data cited in Deloitte, “2019 Insurance Industry Outlook”

125
 Insurtech: Key Techs

* Source: Ovum survey data cited in Deloitte, “2019 Insurance Industry Outlook”

126
 Insurtech: Key Techs

• AIA Hong Kong has launched a blockchain app to share life policy data
with its bank distributors
• AXA Europe is offering flight delay insurance on a blockchain platform
featuring smart contracts
• Ovum’s annual survey of penetration of Software as a Service (SaaS) grew
from 13% in 2016 to 26% last year.
• Carriers and consortiums are expected to launch more impactful
blockchain initiatives due to concerns around data technology

130
 Profile of Insurtech Market

• In the U.S., 63 Insurtech deals, with a total value of $1.59 billion, were
announced in Q4 2018
• Compared with Q4 of 2017, deal count in Q4 increased by 24%, while
funding volume also increased by 155%
• 63 transactions in Q4 2018 – higher than Q3, but lower than Q1 & Q2
• Globally
• UK investment down 9% from last quarter
• China the second largest investor for Q4 after the U.S.
• UK has been responsible for 8% of total investment since 2012
• Investment from international markets remains strong; transactions
outside of the U.S. account for 43% of total transactions since 2012 and
57% in the 4th quarter of 2018
*CBINSIGHTS: Quarterly InsurTech Briefing Q4 2018

129
 Profile of Insurtech Market

• While early-stage investments remain strong

• Seed and Series A account for 64% of total transactions since 2012 and
62% this quarter (up 4% from last quarter)
• Insurtech funding is maturing to mid – and later-stages – 45% of financings
in 2018 took place at the Series A, B, or C stages
• Could lead to consolidation further up

*CBINSIGHTS: Quarterly InsurTech Briefing Q4 2018

133
 Profile of Insurtech Market

• Property and Casualty (P&C) funding volume increased by 57% from Q3

2018 and increased by 89% from Q4 2017
• 41 P&C transactions in the quarter was only marginally higher than the
40 transactions in Q3 but marks a 52%
• Life and Health (L&H) funding volume increased by 1% from Q3 2018 but
marked a 362% increase from Q4 2017
• 2018 hits record level of Insurtech investment, driven by large
investments; deal count increased by 10% from Q3 2018 and funding
volume increased by 26%

*CBINSIGHTS: Quarterly InsurTech Briefing Q4 2018

137
 Size of Insurtech Market
Quarterly Insurtech funding volume – all stages
($ in millions)
$2,000
Property &
$1,800
Casualty
$1,600
$1,400
Life & Health

$1,200
$1,000
$800
$600
$400
$200
$0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2012 2013 2014 2015 2016 2017 2018
Deal Count
P&C 5 3 4 4 5 4 12 9 10 7 16 8 16 14 16 20 44 18 33 29 23 33 27 42 43 44 40 41

L&H 8 6 7 9 15 8 9 4 9 15 14 15 10 19 14 20 15 16 6 13 16 32 21 9 23 27 17 22

*CBINSIGHTS: Quarterly InsurTech Briefing Q4 2018

138
 Size of Insurtech Market
Quarterly Insurtech transaction by target country

18% United States United States

United Kingdom 24% China

2012 – Q4 2018
2% China United Kingdom

Q4 2018
4% Germany 43% Germany
5% India 5% South Africa
57%
6% France Other
6%
Other
8% 9%
13%
2013-Q4 2018 Transactions: 972 Q4 2018 Transactions: 63
Quarterly InsurTech transaction by investments stage

13% Seed/Angel 16%

Seed/Angel
2012 – Q4 2018

3% Series A
2% 32% Series A
0%3%

Q4 2018
5% 41% Series B Series B
5%
Series C Series C
13% Series D Series D
Series E+ 14% Series E+
Other Other
23%
30%

2013-Q4 2018 Transactions: 972 Q4 2018 Transactions: 63

*CBINSIGHTS: Quarterly InsurTech Briefing Q4 2018

139
 Size of Private Technology Investment by Insurers/Reinsurers

Private technology investments by (re)insurers

140
118 118
120 105
100 33 31
26
80 66 26
28
28
60
22
40 29 27
31 34
19
20 1 4 14
24 26 27
11
0
2012 2013 2014 2015 2016 2017 2018

Q1 Q2 Q3 Q4
CBINSIGHTS: Quarterly InsurTech Briefing Q4 2018

144
Application of AI, Insurtech and Real Estate
Technology
Insurtech, Fintech, & Financial Inclusion

Professor Christopher Geczy, PhD

 Microinsurance

• Investment firm: Omidyar Network

• Started by eBay founder Pierre Omidyar in 2004
• Model: Combines for-profit LLC with grantmaking
501(c)(3)
• $1.5B committed since inception: Pierre & Pam Omidyar
• $676MM for-profit investments, $782MM grants

Total Commitments by
Year, 2004-YTD 2019

https://www.omidyar.com/financials

150
 Microinsurance

• Common feature of microinsurance products is the low-income, low-net-

worth population served which otherwise has very limited access to
insurance
• Microinsurance products by type (can be group or individual coverage)
• Term life
• Health / accident / disability
• Casualty (crop insurance, livestock, theft, fire, natural disaster)
• Certain forms of retirement savings plans
• Microinsurance by underwriter / delivery channel type
• Large multinational insurance companies
• Credit unions or mutual associations
• Government or NGOs
• Small community organizations
161
 Microinsurance

• Benefits of microinsurance
• Financial protection through risk pooling
• Insureds can assume more risk
• Crop insurance vs. drought enables small farmers to plant crops which
have higher yields in “good” years & poorer yields in drought years
• Safeguard vs. families falling back into poverty due to illness, death of
breadwinner, housing destroyed, etc.
• Indian ministry of health found one-quarter of all hospitalizations
pushed individual or family into poverty due to cost of treatment*

* Tina Rosenberg, “The Microinsurance Revolution,” New York Times Opinionator blog, June 6, 2012 at
http://opinionator.blogs.nytimes.com/2012/06/06/the-microinsurance-revolution/

167
 Microinsurance

• Benefits of microinsurance
• Can target specific at-risk populations
• HIV-positive, living in flood zone, microentrepreneurs
• Can complement social welfare programs, bolster other microfinance
initiatives
• Can assign term life policy to secure business, education or mortgage
loan

* Tina Rosenberg, “The Microinsurance Revolution,” New York Times Opinionator blog, June 6, 2012 at
http://opinionator.blogs.nytimes.com/2012/06/06/the-microinsurance-revolution/

172
 Microinsurance

• BIMA – insurance business disruptor,

“Insurtech” leader
• Swedish-founded mobile insurance & health
company that provides accident, life,
& health insurance products to 26 million low-income consumers in 15
countries (Africa, Asia, LatAm)
• Largest markets: Ghana, Sri Lanka, Bangladesh, Pakistan.
• Mobile technology lowered prices and brought affordable insurance to
the world’s poorest

TechCrunch https://techcrunch.com/2017/12/19/bima-raises-97m-from-allianz-for-microinsurance-aimed-at-emerging-markets/
BIMA website: http://www.bimamobile.com/about-bima/about-us-new/

176
 Microinsurance

• Business model: BIMA provides microinsurance subscription via basic

mobile phone service for as little as 60c/month on a “pay-as-you-go” rolling
monthly cover
• Offers payouts of up to $1,000 to the family if the insured person dies
• Sign-up takes only 3 minutes and payments are collected through basic
mobile phone service
• Customer growth: over 550 thousand new customers/month (BIMA, 2018)
• 93% of customers live on less than $10/day (BIMA, 2018)
• 75% of subscribers never had insurance before
• Educating customers is the top priority
• $300MM valuation at Dec-2017 sale of LeapFrog Investments’ stake to
Allianz for $97MM
TechCrunch https://techcrunch.com/2017/12/19/bima-raises-97m-from-allianz-for-microinsurance-aimed-at-emerging-markets/
BIMA website: http://www.bimamobile.com/about-bima/about-us-new/

184
 Size of Private Technology Investment by Insurers/Reinsurers
Private technology investments by (re)insurers by target country

16% United States United States

20%
France

2012 – Q4 2018
China
3% China 33%

Q4 2018
5% United Kingdom Germany
6% 54% Germany 13% United Kingdom
Canada Other
8% Other
8% 13%
21%

2013-Q4 2018 Transactions: 972 Q4 2018 Transactions: 63

Private technology investments by (re)insurers by investment stage

12% 11%
11% 16% Seed/Angel Seed
3%
4% Series A 12% Series A
2012 – Q4 2018

Series B 19% Series B

Q4 2018
13% Series C Series C
Series D Series E+
29% 11%
Series E+ Other
Other
24% 35%

2013-Q4 2018 Transactions: 972 Q4 2018 Transactions: 63

*CBINSIGHTS: Quarterly InsurTech Briefing Q4 2018

185