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Insurtech does not simply refer to agile technology startups, those companies with clever names, disruptive business models and hip CEOs. The term, according to analyst Juan Mazzini of global consultancy Celent, also refers to new technologies and operational models.
Insurtech is a booming business. Last year more than US$2.5bn was invested globally in the area - and the pace is not expected to cool.
Celent estimates investment in R&D by insurers in LatAm this year, based on the results of a survey of CIOs, to be about US$139mn for P&C and US$119mn for life and health.
The consultancy has mapped 46 technologies that new entrants such as startups and established firms in other verticals, as well as traditional insurers, are using and exploring. Among them are blockchain, artificial intelligence (AI), and Internet of Things (IofT).
Although insurtech is seeing increased investment in Latin America, insurance is still lagging behind banking in the drive to modernize the financial sectors.
In Brazil, just 5% of financial technology startups in 2016 were geared to insurance, according to data from fintech industry development body Finnovista. The bulk of tech startups (36%) were geared towards payments, remittances, and lending.
"It [insurtech] has arrived [in the region] but it is far from being established," Mazzini told BNamericas. "There are few insurers in Latin America that are demonstrating to the market that they have initiatives in insurtech."
Indeed, in a December 2016 report on innovation in Latin American insurers, Celent said "there is not yet an 'insurance innovator' that is widely recognized in Latin America. This branding opportunity is still available to the companies that develop innovation as a corporate strength."
LatAm financial services giant Grupo Sura is among the pioneers. The company's Colombian insurance unit in 2015 launched Wesura, an online peer-to-peer P&C insurance platform. Users, who take out policies online for items such as bicycles or mobile phones, create their own "communities" of policyholders who are offered rewards and other benefits based on community size and claims record.
LatAm is also home to numerous insurance product comparison websites such as Mexico's ComparaGuru and online sales platforms.
Mazzini said the most visible form of insurtech being embraced today by insurers in the region is probably telematics, in countries such as Argentina, Brazil, Chile, Colombia and Peru. However, even this is in its early phases of development. "It's very incipient because not all companies offer it," Mazzini said.
Meanwhile, IoT-based insurtechs that could arrive in LatAm include UK's Vitality, an online P&C and life product which offers policyholders rewards for adopting healthy lifestyles. The Vitality program was developed by insurance company Discovery and is present in various parts of the world through alliances with established insurers, for example Generali in Germany and John Hancock in the US.
Mazzini cited as another case of a company successfully adopting IoT to bring a claims-prevention solution to market US firm Hartford Steam Boiler Inspection and Insurance Company. The firm, part of Munich Re, uses sensors in buildings to help insurers and customers reduce property losses by monitoring conditions that pose potential risks.
"Something like this has not been done in Latin America yet," Mazzini said. "It is feasible to do it."
Insurers, he said, are also conducting research into AI, which could be used to help drive down call center costs.
In terms of regulations in the region, Mazzini said that watchdogs, in general, were advancing but would likely always struggle to keep pace with changing technology.
At a LIMRA-LOMA insurance conference held in Chile earlier this year, industry decision-makers put innovation under the microscope.
"We cannot ignore innovation," said Edson Franco, CEO of insurer Zurich Brasil, who added that traditional market participants must adapt as quickly as possible and determine where they can squeeze value out of new technology. Franco admitted the industry must up its game in the area of customer service and that change involves cultural shifts within companies.
In 2016, Celent conducted a survey of executives on the topic of innovation in Latin American insurers. One of the key findings was that, in the region, the main barrier to innovation was a lack of top-level leadership.
To sum up, the landscape is changing. An agile new player could this very minute be preparing to launch in the region. It's highly probable. It could be a company offering health or life products to lower income segments. It would not knock the regional industry off its axis but it would reinforce the message that innovation is vital.
Insurance penetration in Latin America is low and the region's economy is gathering strength, mainly thanks to a resurgent Brazil and Argentina. That means the middle class should continue to grow. This, combined with the fact millions of people across the region have smartphones, suggests that there are opportunities a plenty for both incumbents and new players seeking a piece of the action.
A key conclusion of Celent's 2016 survey is that "increasing innovation through the application of new and improved technologies in other consumer sectors is raising the bar of expectations that consumers and distributors have when dealing with insurers. Winning companies will innovate and use technology in new ways in order to retain and attract customers and distribution partners."
You can't really say it better than that.
To sum up, insurtech will alter the face of insurance in Latin America. We won't all be running around with smartwatches monitoring our pulse or taking out on-demand property insurance online anytime soon. But change is on its way - indeed, it is already happening.