Nimbler Insurtech start-ups are getting the jump on large traditional insurers

Products offered by South Africa’s non-life insurers are evolving to accommodate changing consumer behaviours in a digitally-focused world. Change is being driven by direct insurers and niche Insurtech start-ups who seem to have the ‘jump’ on traditional insurers in giving consumers exactly what they want. Recent developments present challenges to non-life insurance brokers who still ‘play’ in the personal lines space, especially those who do not offer digital solutions.

The approach of direct insurers to pandemic is worth unpacking, though we will not dwell on it. Just a couple of days ago King Price announced a response to evidence that customers would drive less following the Covid-19 pandemic. They launched a new motor insurance product, branded Chilli, and with the punchline “pay per k”. Forget any feelings you might harbour towards the direct distribution channel and ask yourself: Could a traditional insurer have introduced a product, from concept to launch, in just three or four months? Another recent development is the distribution partnership between OUTsurance and retail chain, Shoprite. 

An Insurtech view

Pineapple, which boasts being South Africa’s first peer-to-peer insurance platform, offers insurance for personal assets, excluding structures, with a car insurance solution rolling out in the second quarter of 2020. FAnews recently spoke to Marnus van Heerden, co-founder at Pineapple, to find out about the technologies that enable Insurtech businesses to enter the already competitive market for commoditised insurance cover in record time. 

The main technologies that underpin the Pineapple ‘story’ include artificial intelligence (AI), native mobile frameworks, and cloud architecture. AI is the main technology deployed in computer vision, which makes it possible for software to recognise items in photographs, among other things. Van Heerden observed that multiple technologies were harnessed by Insurtech firms to give clients more control. “We deploy technology to achieve ease of access, self-service, and granularity of cover,” he said. 

Technology introduces a range of efficiencies that resonate with consumers in the Millennial and ensuing demographic groupings. They want affordable, efficient, and fully customisable cover that is available to them 24/7 and entirely on their terms. It is easy enough for an Insurtech start-up to meet these demands; so, the question becomes whether they should discard the tried-and-tested principles of insurance in doing so. Has Pineapple simply leveraged technology to improve efficiencies of the existing insurance model, or do you believe you have pioneered a shift in thinking in the personal lines insurance discipline? we asked. 

Traditional principles remain

“Traditional insurance principles such as diversification and the many paying for the few remain in place,” said Van Heerden. “We have, however, reinvented how our product benefits [and the value of insurance] is communicated and delivered to people”. Process automation, another positive from the age of digital innovation, has made it possible for insurers to deliver products that were not previously economically feasible. Imagine, for example, offering usage-based personal asset coverage in the way traditional insurers presently underwrite. It would simply not be feasible. 

Technology makes end-to-end insurance solutions possible, with limited intervention from the insurer. It also introduces new methods of identifying and mitigating risk and reducing fraud. Pineapple’s unique selling points include its camera-centred app and a business model that returns unused premium to members. Additional value accrues to clients through rewards for building social networks within the app. It also acknowledges that customer-centricity is a ticket to pay in insurance distribution, whether you operate in the intermediated or digital channels. The main benefit to Insurtech customers is that their insurance becomes more accessible and more affordable, relative to their specific cover needs. 

“Our ability to save costs during onboarding, combined with improved fraud prevention, means that we can offer extremely low cost insurance policies,” said Van Heerden. “Our policy of operating off a fixed fee and returning unused premiums to members also allows for large scale cost savings”. One of the marvels of technology is that product innovation can take place rapidly and seamlessly. Pineapple already has plans to add buildings insurance cover in the near future, alongside personal lines cyber and pet cover policies. 

Differentiate, or miss out

The key to success in the increasingly competitive Insurtech space lies in differentiating your product from that of your competitors. “We see the existing insurers as our largest competition,” said Van Heerden. “But there are a few Insurtech firms doing some interesting things”. There is some irony in the first part of his statement, given the rush by mainstream insurers to stake their claim in the most promising Insurtech firms. Old Mutual Insure recently partnered with Pineapple through its direct arm, iWYZE. Another start-up, Naked Insure, has close ties to Hollard. 

Insurtech is built around partnerships. Pineapple has good working relationships with Amazon Web Services and Google, with the latter accepting Pineapple into its Insurtech accelerator. They are also exploring links to expand into the US alongside one of the largest insurers in the world. “Locally, we are starting to see some amazing results,” said Van Heerden. “We have grown vastly month-on-month over the last 18 months and are able to control risk with a high level of certainty thanks to the data we gather from the app”. 

Staying ahead of the pack

We concluded our question and answer session by asking Van Heerden what new technologies customers might expect from his business over the next year or two. “We are working on a lot of cool products and technologies; but most of these are still under wraps”, he said. And who can blame him. In this increasingly competitive world one needs to stay a few steps ahead of the pack, always. 

Writer’s thoughts:
Digital platforms appear to be a ‘ticket to play’ in the fast-paced world of insurance distribution. The advantage falls to larger players who have the budgets needed to build and deploy systems from the ground up; but there are cost-effective alternatives available to non-life brokers in the digital world. Tech firms can build broker platforms in a matter of weeks. Is it still possible for non-life insurance brokers to trade profitably in the personal lines segment? Please comment below, interact with us on Twitter at @fanews_online or email me us your thoughts editor@fanews.co.za.