CNR Immersion

Innovation and Disruption in Financial Services 

July 2015

www.pwc.com

InsurTech & the Future of Insurance

Presentation to the Federal Insurance Office 

Marie Carr

Principal, PwCStrategy& 

www.pwc.com/us/insurance
PwC’s Future of Insurance

Contents

1. Disruption: The New Normal in Insurance

2. The Rise of InsurTech

3. Challenges and Opportunities

4. Implications

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Disruption: The New Normal in Insurance
PwC’s Future of Insurance

Insurance: the most disrupted industry.

1. Insurance has emerged as the most disrupted industry, with disruption to all 

lines of business – personal, commercial, life, health, group.

2. The insured, risk, insurer, and the ecosystem are all fundamentally 

changing, which is impacting all aspects of the value chain. 

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PwC | InsurTech

According to our annual CEO survey, insurance executives see more 

potential threats to their growth prospects than any other sector.

5

Q: How concerned are you about potential threat to your growth prospects from the following ?

CEOs stating ‘extremely concerned’ (only includes commercial sectors with more than 50 respondents?)

54%

53%

60%

41%

67%

21%

36%

35%

42%

42%

27%

20%

22%

43%

45%

16%

11%

15%

25%

22%

Healthcare

Power and utilities

Banking and capital markets

Entertainment and media

Insurance

Over regulation Speed of technical charge Changing customer behavior New market entrants

Source: PwC’s 20th CEO Survey
PwC | InsurTech

These concerns have increased in recent years.

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10%

20%

30%

40%

50%

60%

70%

2013 2014 2015 2016 2017

Over regulation Speed of techonological change

Changing customer behaviour New market enterants

Q: How concerned are you about potential threat to your growth prospects from the following ?

Insurance CEOs stating ‘extremely concerned’

Source: Insurance CEOs participating in PwC’s annual CEO Survey
PwC | InsurTech

This is even more significant when including “somewhat concerned” and 

”extremely concerned” about threats to growth.

7

Speed of technological

change

83% Changing customer

behaviors

78%

Availability of skills

81%

New market

entrants

65%
The Rise of InsurTech
PwC’s Future of Insurance

What’s changing?

1. Personal lines – Usage based insurance, ridesharing, peer to peer, direct-toconsumer, ADAS & autonomous cars

2. Commercial lines – Direct to small business, drones, internet-of-things, 

autonomous vehicles, and emerging risks

3. The InsurTech space, which was virtually non-existent just five years ago, 

now has close to 1,000 start-ups in over 14 categories.

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InsurTech is providing new value propositions in an industry that has 

changed little in a century.

Fintech activity overall saw a steep decline

13

12

5

4

3

9

10

7

6

8

11

2

1

0

2010 2011 2012 2013 2015

Total Funding ($B)

2014

FinTech (including InsurTech) InsurTech

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

But InsurTech was up 9.6%, 

albeit from a much smaller 

base

+9.6%

Total Funding ($B)

2010 2011 2012 2013 2014 2015

InsurTech activity continued to grow regardless

Source: DeNovo including a selection of relevant FinTech companies

2016

The overall FinTech market 

was down 31.8%...

-31.8%

2016

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Insured: Social and technological trends mean the next generation of insureds 

will demand solutions to help them and their peers manage and prevent potential 

personal and business disruptions.

The New 

Normal

Contextual

Preventive

Personalized

Rewarded On-demand

Shared

Financial 

Impact

Experience

Impact

Wave 1 Wave 2 Wave 3

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Risk: New technologies will result in new risks; however, risks will become 

more predictive and manageable, thereby allowing models to shift from 

protection to prevention.

The New 

Normal

Health 

Sensors

Connected 

Cars and 

ADAS

Industrial 

Sensors

Other 

sources: 

CAT, 

Weather, 

Imaging, etc.

Connected 

Homes

Behavior 

influencers

Risk 

mitigation

Risk 

factors

detection

Soft 

Telematics Lifestyle

Population 

health

Smart 

cities

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Insurer: Carriers will position themselves as risk management platforms, 

interacting with new partners to bring new value propositions to the market 

while optimizing their operations.

The New 

Normal

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Core claims function

Insurer as a Platform

Core life insurance function
Ecosystem: Unlike other industries, innovation opportunities in insurance are 

driven by advances and changes happening in other areas and industries, and 

this will expand the ecosystem and the opportunity space for insurers.

Intermediaries

Service 

Providers

Carriers

Reinsurers

Regulators

IoT and 

Remote 

Access

Connected 

Health and 

P4 Medicine

Connected 

Cars, ADAS, 

Autonomous

Artificial 

Intelligence/

Cognitive 

Computing

Traditional 

ecosystem

Illustrative, not exhaustive

The New 

Normal

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Incumbents are approaching InsurTech with different innovation models.

Sourcing 

model

Funding

model

Go-tomarket 

model

• Ideas ‘in-sourced’ from within 

company 

• Dedicated internal team develops 

new products & services

• Potential to partner with external 

companies

• Streamlined business case or stagegating to balance procedural burden 

and risk

• Deploy internal SMEs to incubate and 

iterate ideas

• Idea / venture adopted under 

company’s brand

• Ideas sourced from both inside and 

outside the company

• Dedicated internal team constantly 

monitors trends and markets

• Internal incubator identifies and 

supports ventures

• Pitch and invest model applied from 

within the company

• Expert panel provides high level 

guidance and approval at key 

milestones

• Venture can go to market under 

company’s or new brand

• Venture is graduated into company’s 

R&D funnel

• Ideas sourced from outside the 

company

• New ventures division set up to 

identify, iterate and bring to market 

new ventures

• Pitch and invest model where 

Company provides cash and support 

for equity

• Corporate network provides guidance 

for incubation

• New venture goes to market under 

own brand, leveraging corporate 

channels and relationships

Venture 

Capitalist

Innovation 

Hub

Internal 

Incubator

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PwC | InsurTech

Insurers have started to innovate at two different speeds, in 

parallel.

16

15%

1%

80%

4%

Disruptive Radical

Incremental Disruptive

Current Innovation Mix

New Close to actual

Changing Technology

Close to actual New

“Breakthrough”

speed, innovation

from InsurTech

ecosystem

“Incremental”

speed, digital

transformation

roadmap

Disruptive Radical

Incremental Disruptive

Future Innovation Mix

New Close to actual

Changing Technology

Close to actual New

20%

5%

50% 25%

Changing Business Model
Challenges and Opportunities
PwC | InsurTech

To remain competitive, insurers see meeting changing customer needs and 

generating deep risk insights as main challenges/areas of opportunity.

18

3%

25%

39%

42%

53%

65%

74%

Other

Efficiently leverage ecosystem and market resources

Enable the business with sophisticated operational capabilities

Enhance interactions and build trusted relationships

New approaches to underwrite risk and predict losses

Leverage existing data and analytics to generate deep risk insights

Meet changing customer needs with new offering

Source:2016 Global FinTech Survey - Insurance
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There are 6 main areas of opportunity that can provide incumbents new 

solutions and/or improve core insurance functions.

Product

Sales and

Marketing

Distribution Underwriting Claims Customer 

Service

Meet changing 

customer needs 

with new 

offering

Enhance 

interactions and 

build trusted 

relationships

Augment existing

capabilities and 

reach with 

strategic 

relationships

Ecosystem

Incumbents

Customer

Business Opportunities – External View

Leverage existing 

data and analytics 

to generate deep 

risk insights

Utilize new 

approaches

to underwrite 

risk and

predict loss

Enable the business 

with sophisticated 

operational 

capabilities

Business Opportunities – Internal View

As part of PwC’s Future of Insurance 

initiative, we’ve interviewed numerous 

industry executives and have identified six 

key business opportunities that incumbents 

need to take advantage of as they try to meet 

customer needs while improving core 

insurance functions.

The external view includes opportunities 

related to how new customer needs are 

satisfied, how compelling interactions are 

managed and how the ecosystem is 

leveraged.

The internal view focuses on how 

incumbents can use data and new capabilities 

to better manage risk and to increase 

operational excellence.

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Areas of opportunity (continued)

Meet changing Customer needs with new 

offering

• Reaching the Un(der)insured

• Spread of value propositions for microsegments

• Leveraging peer to peer networks

• Emerging solutions for shared economies

• Usage & Behavior based personalized insurance

• New models of holistic advice (Robo-Advice)

Leverage existing data and analytics to 

generate deep risk insights

• Connected car and automated driving 

systems

• Connected Health & P4 Medicine

• Remote data capture and analysis

• Quantification of emerging risks

Enable the business with sophisticated 

operational capabilities

• Crowdsourcing & Democratization of 

information

• Robotics and Automation in core insurance

• As-a-service solutions for core insurance

• Advanced Fraud prediction

Enhance interactions and build trusted 

relationships

• SoMoLo Omni-channel experience

• Online aggregation and comparison

• Targeted engagement & Retention models

• Consolidation of Self directed services

• Education & Shared Knowledge

Utilize new approaches to underwrite risk 

and predict loss

• Sophistication of preventive insurance models

• Shift from probabilistic to deterministic model

• Granular Risk and/or Loss Quantification

• Pay-when-you-need service

Augment existing capabilities and reach 

with strategic relationships

• Rise of B2B2C Platforms

• Ecosystem Partnerships

• Frictionless capital flows across the value 

chain 

PwC I InsurTech
Implications
PwC’s Future of Insurance

Implications for insurers

• Successful operating models of the past relied heavily on functional 

specialties, but as organizations became more segmented, their ability to 

respond and adapt to change became more limited.

• The key to a sustainable differentiation lies in an interlocking set of 

capabilities that allows companies to create a superior advantage and a 

platform for growth.

• To succeed, established insurers should think like a disruptor and act like a 

startup.

– They will need to try new things and not be afraid of “failure” (i.e. going 

in different directions than they initially expected).

– Expect the unexpected (which is not easy for a risk averse industry).

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PwC’s Future of Insurance

Implications for regulators

• InsurTechs often struggle to address regulatory challenges that are part of 

incumbents’ business as usual. Start-ups’ products have to meet appropriate 

regulatory requirements, but these requirements may not come into 

existence until a new product is viable enough for regulators to assess. 

• Further complicating matters is that start-ups are geared toward rapid 

innovation, and do not always consider that regulatory and compliance 

issues or violations can arise later.

• Incumbent insurers need to anticipate the potential regulatory implications 

of new models (e.g., peer to peer, sharing economies).

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PwC’s Future of Insurance

Implications for regulators

• Effective changes to customer protection will come from collaboration 

between insurers and regulators, and with open consideration of emerging 

players’ points of view.

• Traditional IT boundaries stretch more and more with each new venture. 

Start-ups and incumbents need to identify potential cyber risks up-front and 

effectively manage them when scaling solutions, as well as involve regulators 

to identify effective cybersecurity oversight.

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PwC

© 2017 PwC. All rights reserved. 

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further 

details. This content is general information purposes only, and should not be used as a substitute for consultation with professional advisors. 

Marie Carr

Principal, PwCStrategy&

+1 312 298 6823

marie.carr@pwc.com

Thank you!

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