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INSURTECH INSIGHTS HOW INSURTECHS ARE TRANSFORMING (RE)INSURERS - WWW.PWC.COM/INSURANCE
InsurTech Insights
How InsurTechs are transforming (re)insurers

www.pwc.com/insurance
INSURTECH INSIGHTS HOW INSURTECHS ARE TRANSFORMING (RE)INSURERS - WWW.PWC.COM/INSURANCE
InsurTech Insights
Introduction
The insurance sector is changing due to emerging risks, shifting demographics, and new
entrants, forcing traditional players to adapt. Technology, in our view, is the primary catalyst
that is transforming the insurance industry.

We see technological innovation impacting the industry in a number of ways:

1.      InsurTechs are transforming
                                                    2.      InsurTechs are enabling new
                                                                                                       3.       InsurTechs are innovating
                                                                                                                                                                       4.        InsurTechs are breaking
        the existing value chain                            capabilities                                        new products                                                     boundaries beyond insurance
        Transformation of the value chain                   Harnessing emerging technologies and                The emergence of new products such                               InsurTechs are also supporting insurers
        through customer engagement or the                  products to provide (re)insurers with               as cyber insurance, or usage based                               to innovate beyond the existing value
        development of digital distribution                 new value-added competencies such                   insurance is providing opportunities to                          chain into new industries, providing
        platforms. In many cases, data driven               as the ability to assess claims through             InsurTechs and industry incumbents                               access to new customers and markets.
        process optimization is having a large              drone inspections, dramatically                     alike, to capitalize on these new, fast                          This trend is evidenced in our recent
        impact as new firms seek to harness                 decreasing claims processing times.                 growing markets. A plethora of start                             Breaking Boundaries report released
        technology to drive productivity and                                                                    ups are now working with and against                             in conjunction with Startupbootcamp
        cost efficiencies through data analytics,                                                               insurers to develop new products, or                             InsurTech in London. The majority of
        artificial intelligence, blockchain, or                                                                 assist in underwriting these new risks.                          new startups were beyond insurance,
        other emerging technologies.                                                                                                                                             i.e. focused on developing products that
                                                                                                                                                                                 were either in a different industry, or
                                                                                                                                                                                 industry agnostic, but still with a large
                                                                                                                                                                                 value add to the insurance industry.

                                                                                                      InsurTech is now ‘everyday business’ and demands strategic      On the following pages we highlight strategic investments
                                                                                                      consideration, with focused investments and partnerships. In    and partnerships made by (re)insurers as they look to
                                                                                                      fact, PwC’s 2017 Global Fintech Report identified that 84% of   capitalize on the technological innovation impacting the
                                                                                                      insurers expect to increase Fintech partnerships in the next    industry. We expect this trend to continue as (re)
                                                                                                      three to five years.                                            insurers seek to remain competitive and responsive
                                                                                                                                                                      to InsurTech’s impact.

                                                                                                                                                                      PwC InsurTech Insights How InsurTechs are transforming (re)insurers 2
InsurTechs are transforming the existing value chain

InsurTechs
1.          are                                                                                                                 Investments / partnerships example:
                                                                                                                                Cloud-based platforms
transforming                                                                                                                    Cloud-based platforms and on-demand infrastructure facilitates (re)insurers
                                                                                                                                ability to go to market quickly and efficiently
the existing                                                                                                                                                                                                            Global cloud and IP utilization

value chain
                                                                                                                                            More than 70%¹ of traditional (re)insurers use cloud-                       will grow 3.3x2 in the next 5
                                                                                                                                            based solutions                                                             years, and will account for 95%2
                                                                                                                                            •O
                                                                                                                                              nly 10%¹ run most of their digital infrastructure                        of data center traffic
                                                                                                                                             using the cloud
                        From reinventing customer engagement and
                        experience, to using data-driven processes to                                                                       Cloud-based services will lower the barrier to entry
                        optimize operating models creating expense                                                                          for InsurTech companies and innovative (re)insurers,
                        and productivity efficiencies                                                                                       increase marketplace competition, and drive customer
                                                                                                                                            value innovation
                                                                                                                                            •N
                                                                                                                                              ew players will be able to instantly stand-up all
                                                                                                                                             insurance-related processes to provide a digital
                                                                                                                                             experience to consumers
                                                   Marketing &                  Data &                    Claims
               Product
                                                   Distribution               Underwriting              Management
                                                                                                                                            Traditional (re)insurance incumbents will have the
                 Figo                              Coverwallet                Cape Analytics           Clara Analytics                      opportunity to run business model trials at higher
        illustrative InsurTechs
                                                                                                                                            frequency and lower cost structures – either through
                                                                                                                                            InsurTech partnerships or proprietary projects

     Reimaging the                           Redesigning                 Reinvent the             Reconstruct the               July 2018                                 May 2018                                      March 2017
     core market and                         the customer                use of data and          operating and
     product                                 experience                  analytics                expense structure             XL Catlin                                  Nephila               Markel                  Markel                  Figo
     • Reaching the un(der)                 • Online aggregation and   • Remote data capture   • Robotics and               Slice Labs                                 RenaissanceRe         Boost Insurance         HCS Capital
        insured                                 comparison                  and analysis             automation in core         • Slice Labs’ ICS (Insurance Cloud       • Boost Insurance provides an                • HCS Capital Partners has invested
     • Emerging solutions for               • Personalized customer    • Quantification of        insurance                     Services) platform will serve as the      insurance-as-a-service platform               $4M in Figo Pet Insurance, a
        new markets                             engagement platforms        emerging risks        • Cloud based as-a-service      base platform from which XL Catlin        designed to provide backend                   pet insurance platform that is
     • Usage or behavior based              • New models of holistic   • Emergence of             platforms solutions           will introduce their new on-demand        infrastructure for InsurTech startups,        underwritten by Markel Specialty
        personalized insurance                  advice (i.e. robotic /      blockchain, AI, and                                    cyber infrastructure insurance,           digital platforms, and insurance              Reinsurance
                                                artificial)                 other technologies                                     tailored for small / medium               products. It has partnered with            • Figo Pet Insurance differentiates
                                                                                                                                   businesses                                Nephila Capital to offer a dedicated          itself by offering an integrated
                                                                                                                                • ICS provides a cloud-based platform       reinsurance facility with                     cloud-based pet platform with
                                                                                                                                   that supports the full insurance          additional capacity provided by               customizable healthcare, enabling pet
                                                                                                                                   value chain, enabling XL Catlin to        Markel and RenaissanceRe                      owners to manage their pet’s life
                                                                                                                                   go to market quickly                   • Boost Insurance also serves as a
                                                                                                                                                                             general agency for its carrier partners
1
    Novarica: Cloud Adoption in Insurance,
                                                                                                                                                                             and assists in product development,
2
     isco: Global Cloud Index: Forecast and
    C                                                                                                                                                                        underwriting, compliance, and
    Methodology 2016-2021
                                                                                                                                                                             distribution

                                                                                                                                                                                                 PwC InsurTech Insights How InsurTechs are transforming (re)insurers 3
InsurTechs are enabling new capabilities

InsurTechs are enabling                                                                                                                     Investments / partnerships example:
                                                                                                                                            Drones and weather analytics
new capabilities                                                                                                                            Increasing severity and
                                                                                                                                                                                                  Increased levels of heat and moisture in the
                                                                                                                                            frequency of natural
                                                                                                                                            catastrophes has created                              atmosphere leads to more unusual weather patterns
The emergence of new
capabilities fundamentally
                                                    Capabilities are new                                                                    demand for innovative
                                                                                                                                                                                                  and increases the risk of extreme catastrophe events

changes not only the                                technologies utilized to provide                                                        claims solutions                                      •2
                                                                                                                                                                                                    017 was the 41st¹ consecutive year of above
                                                                                                                                                                                                   average global land and sea surface temperatures
existing value chain but
the industry overall,
                                                    value add to the existing                                                               In 2017 there were:
                                                                                                                                                                                                  Natural disasters in 2017 were among the highest
as more incumbents                                  value chain whether through                                                             710¹ natural catastrophes,
                                                                                                                                            93%¹ of which were weather-
                                                                                                                                                                                                  ever recorded
adopt these capabilities
through investments or                              increased efficiency, or ability to                                                     related
                                                                                                                                                                                                   Event                Deaths1 Economic Loss (USD)1
                                                                                                                                                                                                   Atlantic Hurricanes2 4,000+    $220B
                                                                                                                                                                                                                                                            Insured Loss (USD)1
                                                                                                                                                                                                                                                            $80B
partnerships to compete
effectively
                                                    execute new tasks or analyses                                                                                                                  California Wildfires3 43       $13B                      $11B
                                                                                                                                                                                                   Floods in Asia4      116       $7.5B                     300M
                                                    Examples include:                                                                       $310B¹ in overall losses of
                                                    • Use of aerial drones after weather         • Mobile app based technology            which only $133B¹ was insured
                                                       catastrophes to assess losses enabling        for claims adjusting including                                                               (Re)insurers have the opportunity to further deploy
                                                       insurers to process claims significantly      functionality to upload photos
                                                                                                                                                                                                  InsurTech capabilities in claims processing and
                                                       faster than before                         • Utilizing artificial intelligence to   83%¹ of CAT losses occurred                           predictive weather analytics to help bridge the gap
                                                    • Advances in data analytics and                answer customer queries, process
                                                                                                                                            in North and Central America                          between economic and insured losses
                                                       catastrophe modelling through using           claims, or to better understand and
                                                       weather, atmospheric, or maritime             compare insurance policy language      (incl. Caribbean)
                                                       data to better underwrite risk

                                                           Loveland Innovations                                   KatRisk                   July 2018                                  Sept 2016/ Jan 2018                            May 2017
                                                             Underwriting                                 Catastrophe                       XL Catlin                                   Maiden Re              Betterview                Tokio Marine / W.R Berkley
                                                                solutions                              modeling focused on                  Windward                                    Munich RE                                        Weather Analytics
                                                             utilizing drone                               flood and
                                                                                                                                            • XL Catlin has invested $16.5M in         • Maiden Re participated in a $2M            • Tokio Marine HCC and W. R. Berkley
                                                               technology                                  wind risk                           Windward, a maritime risk analytics         seed round for Betterview, a leading          have invested $17M into Weather
                                                                                                                                               startup, during a Series C capital raise    platform and service provider for             Analytics during a Series B round
                                                                                                                                            • Based in Tel Aviv, Windward uses            capturing and analyzing data from          • Weather Analytics provides
                                                               Mobile app                                 Platform that                        proprietary technology to                   drones                                        predictive weather insights by
1
     on – Weather, Climate, and Catastrophe
    A                                                         streamlining                               applies artificial                  monitor and analyze ship                  • Additionally, Betterview later                 collecting atmospheric data and
    Insight
2
     urricanes Harvey, Maria, and Irma occurring
    H
                                                                the claims                                intelligence to                    activity including: how they                 partnered with Munich Re to                    leveraging a team of experienced
    August 25-September 2, September                             process                                insurance policies                   navigate, when they operate,                 offer drone imagery, analysis, and             meteorologists
    18-September 22, and September 4September                                                                                                fortitude in rough water, and how            reporting to Munich Re’s insurance
    12 respectively
                                                                  Snapsheet                                     Risk Genius                  they maneuver in ports                       company clients
3
     ctober Northern California Wildfires and
    O
    December Southern California Wildfires                    illustrative InsurTechs
4
     ummer flooding in China and India and
    S
    January flooding in Thailand

                                                                                                                                                                                                               PwC InsurTech Insights How InsurTechs are transforming (re)insurers 4
InsurTechs are innovating new products

InsurTechs are                                                                                        Investments / partnerships example:
                                                                                                      Cyber Security
innovating new products                                                                               Escalating threats associated with data breaches and
                                                                                                      cyber attacks have prompted (re)insurers and brokers
                                                                                                      to offer risk mitigation solutions

InsurTechs are assisting
incumbents in creating
                                                      Many incumbents are                             Global Annual Cost of Cybercrime

                                                                                                                                                           Cybercrime will cost the global economy over $2T1 in
new products or lines                                 underwriting these new risks via                                                                     2019
of business within the
insurance industry,                                   partnerships or by making                                                                            • Annual cost of cybercrime is growing faster than
                                                                                                                                                              services provided
                                                                                                      +$2T1                      2019
unlocking new markets                                 investments in innovative                                                                            Growing frequency of attacks due to:
and opportunities
                                                      InsurTechs

                                                                                                                                     3x growth
                                                                                                                                                           • Limited understanding of common vulnerabilities
                                                                                                                                                           • Unpredictable scale of damage on critical
                                                                                                                                                              infrastructure
                                                                     Usage-based      Insurance for
                                                          Cyber                                                                                            • Data scarcity impedes development of cyber
                                                                    or on-demand       the sharing
                                                        Insurance                                                                                             insurance
                                                                      insurance         economy
                                                                                                      $600B2
                                                                                                                                                           Average cost of a cyber breach was $349,0003 for
                            illustrative InsurTechs     CyberCube       Trōv             Slice Labs                                                        small companies, reaching an average cost of $3.2M3
                                                                                                                                                           for big organizations
                                                          Zeguro      Metromile          Guardhog
                                                                                                                    2017

                                                                                                      July 2018                                  June 2018                                    November 2017
                                                                                                      JLT                                         AXA                                          Hartford Steam Boiler
                                                                                                      CyberCube                                   SecurityScorecard                            At-Bay

                                                                                                      • AXA has selected SecurityScorecard, a   • JLT and CyberCube will partner to         • Hartford Steam Boiler (Munich Re)
                                                                                                         leader in cyber security ratings,          enhance cyber strategy and risk              participated in a $6M investment seed
                                                                                                         to provide security ratings as part        modelling capabilities for clients           round for At-Bay, a digital insurance
                                                                                                         of the underwriting process for         • CyberCube’s robust and innovative            platform that helps organizations
                                                                                                         AXA’s rapidly growing cybersecurity        analytics include fully probabilistic        mitigate cyber risk
1
    Juniper Research: The Future of Cybercrime                                                           business
    & Security                                                                                                                                      capabilities and a wide range of          • At-Bay leverages real-time data
                                                                           Cybercrime will cost the   • SecurityScorecard platform will            possible loss scenarios                      collection and active client
2
    McAfee: Economic Impact of Cybercrime
    – No Slowing Down,                                                     global economy over           provide AXA’s underwriters with                                                         monitoring to predict future risks
                                                                                                         an overall risk rating and detailed                                                     rather than analyze historical attacks
                                                                           $2T in 2019
3
    NetDiligence: 2017 Cyber Claims Study
                                                                                   ¹                     view into the cyberhealth of AXA
                                                                                                         insureds

                                                                                                                                                                       PwC InsurTech Insights How InsurTechs are transforming (re)insurers 5
InsurTechs are breaking boundaries beyond insurance

InsurTechs are breaking                                                                                                        Investments / partnerships example:
                                                                                                                               HealthTech
boundaries beyond                                                                                                              HealthTech and wearable                               Analysts forecast the global telemedicine market will

insurance                                                                                                                      technology will enable
                                                                                                                               (re)insurers to more
                                                                                                                               accurately underwrite and
                                                                                                                                                                                     grow to $79B1 during the period between
                                                                                                                                                                                     2018-2022
                                                                                                                                                                                     •Growth is driven by increasing adoption of digital
                                                                                                                               price health insurance                                   health platforms such as mobile-health, telehealth,
InsurTechs are broadening                         Categorization of Startupbootcamp InsurTech Participants                                                                              electronic medical records, and other wireless
their product offerings                                                                                                                                                                 technologies
beyond insurance,
causing a shift to more                                                                                                                                                              Wearable HealthTech devices gather critical data – for
                                                                                                                   80%
generalist business                                                                                                                                                                  both consumer and underwriter:
                                                      75%
models. The graph below                                                                                                                                                              •P
                                                                                                                                                                                        rovide users with data necessary to make healthy
highlights the dramatic                                                                   60%
                                                                                                                                                                                       changes in lifestyle
shift in Startupbootcamp                                                                                                                                                             •P
                                                                                                                                                                                        reemptively detect and cure life threating diseases
InsurTech participants
(2016-2018):                                                                     40%
                                                                                                                                                                                     The U.S. eldercare population will become a significant
                                                                                                                                                                                     addressable market given that approximately 20%2 of
                                                             25%                                                                                                                     people will be age 65 or older by 2030
                                                                                                             20%
                                                                                                                                                                                     • Currently, 87%3 of adults age 65+ want to remain
                                                         2016                         2017                      2018
                                                                                                                                                                                        in their own home as they age, creating a demand
                                                                                                                                                                                        for HealthTech solutions that permit or support
                                                      Within insurance
                                                                                                                                                                                        independence
                                                      Startups focused on offerings specific only to the insurance industry

                                                      Beyond insurance
                                                      Startups focused on developing products that are either in an
                                                      entirely different industry or industry-agnostic, but have large value   June 2018                                  September 2017                             September 2016
                                                      add to insurance - like HealthTech
                                                                                                                               Scor / Transamerica                        Generali                                    Swiss Re
                                                                                                                               iBeat                                      CareLinx                                    Sharecare

                                                                                                                               Scor Life & Health Ventures and            Generali Global Assistance acquired        Swiss Re has formed a partnership with
                                                The global telemedicine market will                                            Transamerica Ventures participated in a    CareLinx, a leading tech-enabled           Sharecare, a health and wellness
Source: Breaking Boundaries – How InsurTech
is moving beyond insurance (Startupbootcamp,    grow to $79B1 during the period                                                $10M seed round for iBeat                  caregiver marketplace with over            engagement solution providing people
PwC),                                                                                                                          iBeat is a leading provider of a cardiac   200,000 caregivers on the platform         with personalized resources
                                                between 2018-2022
1
    Global Telemedicine Market 2018-2022                                                                                       monitoring smartwatch that                 CareLinx partners with global health       The partnership is focusing on helping
2
    U.S. Census Bureau: An Aging Nation: The                                                                                   automatically notifies emergency help,     systems and insurance companies to         people manage financial stress, one
    Older Population in the United States,                                                                                     family and friends of the users’ status    offer a post-acute care solution that      of the leading causes of chronic health
3
    AARP Survey: Livable Communities Baby                                                                                      and location                               delivers on-demand comprehensive           issues
    Boomer Facts and Figures                                                                                                                                              support and cloud-based tools for
                                                                                                                                                                          real-time interventions

                                                                                                                                                                                              PwC InsurTech Insights How InsurTechs are transforming (re)insurers 6
Re(insurers) need to
develop and implement
focused InsurTech strategy
Conclusion
                                                                                                                                                                                                                  Contacts

Historically, (re)insurance transactions were often focused                                                We have discussed four ways we see InsurTech impacting                                                 Stephen O’Hearn               Leslie G. Fenton             Manoj Kashyap                      Gero Matouschek
on consolidating or diversifying books of business. With                                                   the industry and highlighted key strategic investments and                                             Global Leader, Insurance      Managing Director,           Global FinTech Leader              EMEA Digital Transformation
the emergence of InsurTech, many (re)insurers began to                                                     partnerships. These have demonstrated the efforts of (re)                                              Partner, PwC Germany          PricewaterhouseCoopers       Partner, PwC US                    and Insurance
invest in new technologies for fear of ‘missing out’ but often                                             insurers in transforming the existing value chain (through                                             +49 8938 0069 688             Corporate Finance LLC        +91 226 669 1888                   Partner, PwC Germany
                                                                                                                                                                                                                  stephen.t.ohearn@pwc.com      United States                manoj.k.kashyap@us.pwc.com         +49 89 54525 634
without a strategic plan for the use of technology across the                                              cloud-based platforms), unlocking new capabilities (with
                                                                                                                                                                                                                                                +1 312 298 5866                                                 gero.matouschek@strategyand.
organization.                                                                                              drone analytics), or creating access to new products or                                                Patrick Maeder                leslie.g.fenton@us.pwc.com   Henri Arslanian                    de.pwc.com
The InsurTech industry has continued to mature, technology                                                 markets (with cyber security and HealthTech). There are                                                EMEA Leader, Insurance                                     Hong Kong and China FinTech
adoption has become more widespread, and successful                                                        other emerging trends that also merit focus. (Re)insurers are                                          Consulting                    Ritendra Roy                 Leader                             Paul Mitchell
use cases have begun to emerge. We are seeing a shift to                                                   recognizing the impact of targeted investments or strategic                                            Partner, PwC Switzerland      Director                     Partner, PwC Hong Kong             South Africa FinTech Leader
(re)insurers making targeted investments or partnerships                                                   partnerships which if executed and implemented properly,                                               +41 798 180 104               PricewaterhouseCoopers       +852 2289 2490                     Director, PwC South Africa
                                                                                                           can unlock meaningful value for their organizations.                                                   patrick.maeder@ch.pwc.com     Corporate Finance LLC        henri.arslanian@hk.pwc.com         +27 21 529 2001
to achieve strategic initiatives and augment (re)insurers’                                                                                                                                                                                      United States                                                   paul.Mitchell@za.pwc.com
capabilities. InsurTech is also enabling (re)insurers to expand                                            In order to compete effectively, (re)insurers need the right                                           Javier Baixas Vallas          +1 646 818 7098              Glynn Austen-Brown
beyond insurance into adjacent markets that have value-add                                                 talent, strategy, ability to execute on deals/partnerships, and                                        Global InsurTech Leader       ritendra.roy@us.pwc.com      UK Insurance FinTech Leader        John Shipman
to their business models.                                                                                  finally, a viable plan to implement the InsurTech’s capability                                         Partner, PwC Spain                                         Partner, PwC United Kingdom        Asia-Pac FinTech Leader
                                                                                                           for their organization. We expect those who struggle on these                                          +34 915 685 484               Luke Hilditch                +44 7383 013 933                   Partner, PwC Australia
                                                                                                           fronts to fall behind their competitors.                                                               javier.baixas.valls@pwc.com   Associate                    glynn.austen-brown@pwc.com         +61 8266 0198
                                                                                                                                                                                                                                                PricewaterhouseCoopers                                          john.shipman@au.pwc.com
                                                                                                                                                                                                                  Arthur Wightman               Corporate Finance LLC
                                                                                                                                                                                                                  Bermuda/Caribbean Insurance   United States
                                                                                                                                                                                                                  Leader                        +1 312 660 9522
                                                                                                           In order to compete effectively, (re)                                                                  Partner, PwC Bermuda          hilditch.b.luke@us.pwc.com
                                                                                                           insurers need to execute on deals and                                                                  +1 441 299 7127
                                                                                                                                                                                                                  arthur.Wightman@bm.pwc.com    Dmitry Simakov
                                                                                                           partnerships, AND a viable strategic                                                                                                 Analyst
                                                                                                           plan to implement the InsurTech’s                                                                                                    PricewaterhouseCoopers
                                                                                                                                                                                                                                                Corporate Finance LLC
                                                                                                           capability for their organization. Those                                                                                             United States
                                                                                                                                                                                                                                                +1 312 596 9086
                                                                                                           without a technology strategy will be                                                                                                dmitry.simakov@us.pwc.com
                                                                                                           left behind.

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