According to Murphy’s Law, “if something can go wrong, it will.”
While we never want to believe disaster will strike, events like car crashes happen often, and natural disasters that destroy entire towns occur as well; hurricanes Harvey and Irma wreaking havoc on Texas and Florida are just the latest example.
Still, many choose to forego getting insurance for events they’d rather not think about, especially when buying insurance is a time-consuming and complex process.
Hopefully, this maze of an industry can be streamlined with the burgeoning industry of insurance technologies (InsurTech) – including machine learning, cyber-security, and big-data analytics. Not surprisingly, Israel is at the forefront.
It’s a booming field. According to CB insights, InsurTech startups raised $1.7 billion in 2016; accountancy firm PwC estimates that two-thirds of insurance industry players are now engaging with InsurTech in some way; and KPMG labelled InsurTech as one of the hottest investment trends in 2017.
With strengths in areas such as FinTech and cyber security, Israel has become a leading player in InsurTech. Of the 15 most funded InsurTech companies in 2017 globally, five are Israeli or have an Israeli founder, according to Israeli venture capital firm Tel Aviv Partners.
Insurance has traditionally been viewed as an over-regulated industry that lacks innovation. Many insurance companies use outdated infrastructures, and their processes are wrought with redundancies. For example, traditional home insurance providers still include coverage for items like silverware, fur coats, and – amazingly – the loss of paper shares and bonds kept in safes at home, according to Aviad Pinkovezky, head of product at the Israeli InsurTech company Hippo.
The barriers to innovation have, until recently, caused startups to avoid the sector and channel resources instead into industries such as banking. So what’s changed?
Insurance companies have found that they can no longer get away with inefficient operations. As fraud prevention and big data management become more important, insurance companies have struggled to keep up.
Amongst millennials, there is a growing demand for personalized services and smooth user experiences. Meeting with insurance agents, faxing information, and waiting weeks are no longer acceptable for the tech-savvy generation.
For traditional insurance companies, the rise of InsurTech is a “wakeup call to show them that things could be done differently,” Yoav Tzruya, a partner at venture capital firm Jerusalem Venture Partners (which invests in InsurTech), tells NoCamels.
Big data, for example, helps insurance companies analyze trends so they are able to offer the right insurance package to consumers. Artificial Intelligence reduces the need for agents and paperwork, and cyber-security technologies protect insurance organizations from fraud and hacking. The Internet of Things (IoT) sector, tagged as one of the rising trends within InsurTech, will provide insurance companies with data they can use to prevent future losses.
Israel is one of the leaders in the global InsurTech industry. Strengths in high-tech areas such as cyber-security and machine learning mean the nation has a competitive advantage. “InsurTech is really taking technologies which Israel is excellent at and creating business value out of them,” Tzruya explains.
Israel has seen success in other FinTech sectors, such as online payments, and Israeli startups applying this technology and expertise to InsurTech are making waves around the world.
One of them is Lemonade, which is already among biggest names in the global InsurTech industry. It is a peer-to-peer home insurance startup leveraging artificial intelligence. By replacing brokers with bots and machine learning, the company offers lower costs, faster results, and packages that are tailored to the user. Lemonade is the first company to have an insurance claim handled and paid by AI – it took three seconds.
Founded in 2015 by Israelis Shai Wininger and Daniel Schrieber, Lemonade has raised $60 million in four funding rounds, and by June of this year has insured over 14,000 homes in the US. “Technology drives everything at Lemonade,” according to Wininger. “From signing up to submitting a claim, the entire experience is mobile, simple, and remarkably fast.”
Another Israeli InsurTech startup, Hippo Insurance, has shifted the home insurance process online, allowing users to get a quote in about 60 seconds. Average insurance companies require you to answer 60 questions to get a quote; Hippo reduces this to 12 or 13, according to the company.
The startup also innovated the insurance product itself, offering coverage of items that are used today such as home office equipment, and claims to reduce inefficiencies and therefore cut prices by 25 percent.
Hippo is pushing boundaries in predictive insurance. Using artificial intelligence, satellite imaging, and sensors, they’re working on automatically updating your insurance if you build a new room, or warning you if you have leaks in the house.
Founded in 2015 by Assaf Wand and Eyal Navon, Hippo has so far raised $14 million. Its services are currently offered California, with plans to expand to the rest of the US.
Observers are confident that InsurTech will continue to be an attractive target for investors. Tzruya believes that instead of replacing traditional insurance companies, InsurTech startups will simply encourage them to innovate: “They will not take a big bite out of the insurance market as a whole, but they will be kind of lighthouse companies that will show the way as to how things can be done.”
Photos and video: Courtesy