Five New Types of Insurance: From Revenge Porn To Drones

November 12, 2016     By : Vladislav Solodkiy

In the recent FinTech report Money of the Future ‘H12016,” you can find the latest trends in InsurTech – one of the fastest growing verticals in FinTech, which has generated $3 billion in new investments in 2015 (with the total FinTech investments around $21B) and already more than $2 billion in the first half of this year.

Insurance offers a huge opportunity that has yet to see real innovation. People do not like or trust insurance companies. Yet over the last 18 months, more than 100 insurance startups have been launched. Many entrepreneurs are waking up to the fact that insurance is arguably one of the most old-fashioned, analog consumer services in existence, and they are creating companies to upend this premise.

Vivek Garipalli, CEO of Clover Health, mentioned why startups are more successful than traditional players in innovation: “There’s a big difference between spending a lot of money on technology and being a technology company.New types of insurance have come along with new industries, business models and monetization strategies, technologies and gadgets, as well as data on customers’ behavior.

P2P-insurance: Back to the original idea of the mutual company

While other insurance companies make money when denying claims, Lemonade only takes one flat fee. In addition, they give all unclaimed money to the charity of your choice. What’s more, your donation is pooled with other Lemonade customers who also want to give to that same charity – whether it’s a big international nonprofit or a local PTA. So the more leftover money from all of you, the more your charity gets. Since its public launch with a $13 million investment from Sequoia Capital and Israeli venture investor Aleph late last year, Lemonade has amassed a series of impressive wins.

Hong Kong-based Horizons Ventures, a private investment arm of Li Ka-Shing, has led a US $15.3-million funding round in Berlin-based P2P-insurance startup Friendsurance. The way the model works is that everyone contributes to a common pool to mitigate risk, that’s the very nature of insurance. However, in Friendsurance’s case, any premiums left over in the fund at the end of the year are paid back to contributors, as the risk didn’t happen.

Louis de Broglie, CEO of InsPeer, describes the method’s value as follows: “The idea is to use technology to help you leverage your local community – with all its positive aspects. So it is true that we are coming back to the original idea of the mutual company.”

Sharing economy, self-driving vehicles, millennials

Slice Labs offers insurance for on-demand workers and providers like Uber and Airbnb, starting with rideshare drivers and then home share hosts. The startup has raised $3.9 million in seed funding from Horizon Ventures and XL Innovate. These products will be available on a transactional basis — so ridesharing drivers should be covered from the moment they start driving or get into a car, and they only pay for coverage during the time when they work (making it more affordable than just taking out a pricey commercial insurance policy).

The same trend related with sharing economy and “to use, not to own” millennials’ behavior has influenced another company. Dan Preston, CEO of Metromile, mentioned: “Metromile’s differentiator is down to “urbanization and a shifting mindset of millennials.” By this, he means that the less frequent and less regular use of cars by these groups makes per-mile services. “Our go to market strategy is focused on large urban areas and aimed at developing a brand with each city that we roll out into. The people who switch to pay-per-mile insurance commute differently. They take multiple forms of public transit, walk, bike or even ride-share to work so a usage-based option makes more sense to them.”

Cyberinsurance in a digital world

The Verizon 2016 Data Breach Investigation Report concludes that large and small companies across all industries in all geographies are at risk of being targeted by a cyber-attack; in fact, it is estimated that 62% of cyber-breach victims are small to mid-sized businesses.

Cyberinsurance is a subcategory within the general insurance industry, offering products and services designed to protect businesses from internet-based risks.

In just a couple of years, the US cyber-insurance market has grown from about 10 insurers to 50 that provide stand-alone cyber insurance policies. In 2015, these providers generated $2.75 billion in premium revenues in the US. According to a recent study by PwC, this number is set to triple to $7.5 billion by 2020.

Revenge porn and cyberbullying security

Live streaming of revenge porn is on the rise on the internet, Europe’s police agency warned recently, saying vulnerable young ladies are increasingly falling victim to sexual predators.

A US-based insurance company announced a new policy that specifically covers the damage of online abuse. Chubb Insurance said that its personal cyberbullying insurance would cover counseling fees, lost income from taking off from work, and the cost of hiring an online reputation management firm to help remove smears online. Though the policy is aimed at parents whose children may become victims of cyberbullying, it will also cover adults who are targets of online harassment, which it defines as “three or more acts by the same person or group to harass, threaten or intimidate a customer.”

Once considered harmless trolling, online harassment is increasingly recognized for its serious offline consequences.

From car to drone insurance

AIG is rolling out a new set of policies aimed at the growing drone industry. The policy offerings are designed for a newfangled purpose: protecting the operators of unmanned aircraft from liability in case of collision, technical problems, or any other sort of situation that could cause damage either to people or property on the ground. AIG offers optional coverage for “spoofing”: when a hacker hijacks your drone remotely.

Commercial use of drone aircraft, which will take place over the next decade, is expected to shake up industries ranging from motion pictures to agriculture and energy.

The future of InsurTech

Most markets are lacking BaaS-platforms or open APIs (like US Bancorp or BAASIS) for launching and scaling, and local regulatory policy does not allow to quickly and cheaply license independently. For Asia, the problem of infrastructure is “the dual challenge” – so many countries, and all of them so different. We still haven’t seen any successful-in-scaling InsurTech startups.

Vladislav Solodkiy

Vladislav Solodkiy

Managing Partner at Life.SREDA
Vladislav Solodkiy is the Managing Partner at Life.SREDA, a Singapore-based FinTech VC and also one of the top 35 most influential people in the FinTech world.
Vladislav Solodkiy