Despite InsurTech seeing a decline in funding YOY, prevention technology could open up a new host of opportunities, according to InsurTech Capital founder Minh Tran in a research interview with FinTech Global.
The insurance sector often takes a while to react to change, with a culture of meetings it makes for long life cycles, Tran said. This means there is a big opportunity for the InsurTech space, and the area which has Tran most excited is the use of prevention technology, with this being the next consumer trend.
Tran said, “In the future, insurance companies will take a leading role in the InsurTech space with prevention because, prevention is the key for insurance companies to provide new services to the policy holders, by how to stop smoking, how to avoid an accident when you are drunk, or how to prevent you from making a bad investment decision. Re-insurance companies have a unique chance to be more active in the InsurTech space by investing in the prevention space.”
Utilising the power of prevention technology, insurers will be able to interact with a policy holder at a much earlier stage than before. He said, “Right now, insurance companies are more or less at the end of the value chain paying medical bills and so on. A lot of insurance companies are trying to get earlier in the value chain.” Through these new capabilities insurers could link up with potential ways for a client to avoid, say going to a doctor for medical attention.
Last month, Tran launched a new investing service through Seed Factory called InsurTech Capital. This platform serves as a ‘VC-as-a-service’ and will help to connect between 10 and 20 insurance companies with various investment opportunities from around the world. Unlike a traditional venture capital firm, Tran will work alongside insurance firms, using their committed equity on a personal-base to make deals with a startup and foster strategic of business partnerships.
As a sector, InsurTech has seen a decline in funding with 2016 seeing almost a 20 per cent decline in funding to the levels reached in 2015, according to data by FinTech Global. While the funding fell from $1.9bn to $1.5bn, there had been a rise in deal numbers, with 2016 closing 90 more transactions. However, 2017 is again set to decline in the investment value, but also in deal volume. As of the end of September, the sector has only seen $1.3bn invested via 137 deals.
As the funding to the sector declines, the main aim of InsurTech Capital is to help foster the development of prevention, he added, “The trend is clearly towards prevention so why I’m doing this is because I want to be there when prevention tech will be mainstream. I am doing it now as I think it will take two years to build it, and in two years when it is mainstream I will be in the middle of it.”
How the sector will evolve
InsurTech’s next step is to branch out of its current usage and look for the technology that will re-invent how business is done, like AI, but Tran believes prevention technology will be the driving force.
“The insurance industry has been very defensive in the past. Four years ago, they were very defensive because they wanted InsurTech to avoid being ‘Uberised’, now insurance companies are doing investments and collaborations because they want to become partners to the startups.”
At the moment the prevention technology is mainly focused on the health sector and are yet to tapped up by insurance firms. This will change, with insurers exploring these types of solutions to be integrated with theirs. Merging the prevention platforms with the distribution levels of insurance companies will help to bridge early stage technology with mass markets, Tran said.
He added, “Insurance companies will search for innovative technology to partner with them and then distribute them. I see the insurance company going to distribute prevention technology, which at the moment are called HealthTech or life science.”
While prevention is set to be the way forward for the sector, the industry is set to move away from more P2P solutions, Trand believes. The issue for these type of products, is they do not revolutionise the way the industry works, or open up a host of offerings like prevention technology can.
“P2P is more of a way to distribute insurance, it’s what we can low-tech, where you improve something but you’re not going to shift delivery. There’s a lot of deep tech like Blockchain and AI which will fundamentally change the way an insurance company operates, and I think that deep tech moving toward prevention will be a key to creating new services and distribution services.”
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