New wave of innovation and opportunity



About 75 percent of insurance industry players predict Financial Technology (FinTech) innovation as a disruption in their business in the next five years but only 43 percent have FinTech at the heart of their corporate strategy. Less than 30 percent of insurers are exploring partnerships with FinTech and only14 percent have more active participation by investing in and/or supporting FinTech incubators.

These are some of the key highlights from the 2016 PwC Global FinTech Survey.

But what is Fintech all about?: Based on PwC’s FinTech Q&A publication in 2016, FinTech describes the evolving intersection of financial services (such as banks and insurance) and technology. The term can refer to startups, technology companies, or even legacy providers that offer existing financial services at lower costs and through new technology driven solutions.

In the insurance industry landscape, Insurance and Technology (InsurTech) is the FinTech sub-segment that is seen to address the industry’s disruption challenges and create opportunities through the integration of technology in the insurance industry business. It is emerging and seen as a game-changing opportunity for insurers to innovate, improve relevance of their offerings and grow.

Disruption: According to the 2016 PwC Global FinTech Survey, top threats related to the rise of Fintech that are high in the insurers’ agenda include: margin pressure (73 percent), losing market share (69 percent), and customer churn (59 percent). The threats of FinTech believed by insurers are well grounded, as it is gaining significant momentum in an industry that is mainly dependent on better data insights and highly driven by evolving customer needs and expectations.

The key leverage that insurers expect from FinTech relates to meeting the challenge of evolving customer needs and the ability to match offerings with exacting customer expectations. Clients now expect personalized insurance solutions and the “one size fits all” strategy is simply a thing of the past.

Opportunities: The Internet of Things (IoT) certainly brought to the fore significant technological innovations such as sensors, wearables, drones, digital apps, robotics and artificial intelligence, among others. These are new external data sources that can be filtered and analyzed and which could provide insurers with deep risk and loss insights that can be accessed remotely and in real time, and support a more customer-centric experience.

In PwC’s 18th Annual Global CEO Survey, 67 percent of consumers would be willing to have a sensor attached to their home or car if doing so would lower their premiums, 68 percent would be willing to download and use an app from their insurance providers and 50 percent would be prepared to provide their insurers with additional personal and lifestyle information to enable them to seek the best deal for relevant offerings.

In-car sensors and vehicle telematics are already in use and provide measure how safely policyholders drive and offer lower premiums to more careful roadrunners. This technology also supports usage based insurance model which implements the concept of writing auto insurance based on usage and/or driving behavior (pay as you drive and pay how you drive concepts). Metromile, a car insurance startup in California, has developed customer (rather than risk) centric value proposition for occasional drivers which offer insurance coverage at a low base rate and then charges a few cents per mile driven. It also offers an app that provides personalized driving, navigation and diagnostic tips, which can even remind drivers where they parked.

There are also the connected home technologies (such as security systems, intruder alarms, smart thermostat and smoke detectors). These sensors can be used as a warning system that supportsrisk and loss prevention and therefore reduce severity of losses and claims.Startup in this field includes Nest located in Palo Alto California. Some of their products are Nest Protect, smoke and carbon monoxide alarms that help keep customer safe, Nest Learning Thermostat and Nest Energy Services that keep customers comfortable and address home energy consumption.

Wearables like smart watches provide insurers insights on customer’s health and lifestyle allowing for better assessment of risk and creation of customized insurance coverage for customers. Sureify, a life insurance company, has developed a platform that allows insurers to underwrite insurance based on lifestyle data inputs they obtain from wearables.

Digital apps and devices that provide inputs on health monitoring support for treatment and prevention of disease will enable insurers to understand customer risk profile and to monitor and improve the health of customer thereby reducing healthcare spending. A startup in California, iBeat, announces that it will build a wearable heart monitor that will continuously monitor a user’s heart activity capable of alerting the user and health care providers should a heart irregularity occurs. California’s NeuroSky is developing next generation wearable sensors that can detect ECGs, stress levels, even brainwaves. AIA’s Vitality Program in Asia provides a full-scale wellness program that provides reward points in the form of lower life insurance premiums and discounts/rebates from its health and wellness partners as customer engage in a healthier lifestyle.

The use of drones not only provide the mechanism to capture digital aerial images without having the insurers and clients access the remotely affected area but also provide means to understand and assess the extent and severity of property damage and loss in real time. Claims assessment and compensation process will also require a lot less time and effort. Drone startups include Airphrame and Airware in San Francisco, California.

Also, Wisconsin-based American Family’s venture capital arm is investing in drone technology in order to explore new approaches to access and capture risk data.

Service concepts such as 24/7 robo-advisors that can provide ready access to information about financial planning and investment management address the growing need to enhance interactions with clients and provide seamless customer experience. It can significantly cut cost by automating routine transactions and research, as well as allow agents and brokers to spend more time developing customized solutions. Well-known players in the US include FutureAdvisor, Betterment and Wealthfront, among others.

Gamification is another emerging trend in many markets. Gamification uses game mechanics such as points, challenges, leader boards and incentives in real life scenarios to motivate the audience to higher and more meaningful levels of engagement. Gamification can be used to educate people about various insurance policies and can be employed internally to train employees. AXA has launched Crazy Cash, a game in Indonesia, where less than 2 percent of people have insurance, to educate the population of insurance policies and benefits. The game was played by 30,000 players, generated 200,000 tweets and resulted to 225,000 visits in its website in five weeks.

The FinTech wave of opportunity is also beginning to be felt in the domestic market. Global insurance giant, Sun Life of Canada and local telecommunications giant, PLDT, teamed up to develop FinTech services in the Philippines. The strategic alliance, through innovation arm, Voyager, and mobile provider, Smart Communications, seeks to focus on integrating digital and mobile technologies to offer more innovative and financially inclusive insurance services in the domestic fold, with Voyager providing the digital platform.

A combination of big data analytics, sensor technology and data network that make up the Internet of Things would allow insurers to anticipate risks and customer demands with far greater precision than ever before. The benefit would include not only keener pricing and sharper customer targeting but a decisive shift in insurer’s value model from reactive claims payer to preventive risk advisors.

Seizing the future: At the backdrop of many disruptive challenges, it is important not to lose sight of the huge opportunities that are opening up in and around the insurance industry. To seize the future, insurance market players need to look beyond the traditional boundaries of insurance business, to embrace new ways of working, new ways of interacting with customers and the whole new possibilities of what the business can deliver.
While the new wave of FinTech innovation is largely seen and felt at the international front, it will only be a short matter of time that the full wave of change will come to the domestic fore, and local insurance players will need to gear up to set sail in this new wave of change. The speed of integrating FinTech innovation at the heart of one’s corporate strategy, whether developed within the organization or in alliance with startup technology entities, will be key if one is to stand up and surf through confidently with this emerging wave of innovation.

Imelda D. Mangundaya is a Partner from Assurance and Assurance Risk Management of Isla Lipana& Co./PwC Philippines. Email your comments and questions to This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.


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