Time and again, it has been said that the insurance industry is ripe for disruption but large capital requirements, product complexity and regulation have slowed down the penetration of the digital force in the insurance industry. However, one of the form of disruptions slowly taking root in the insurance industry is Insurtech.
What is Insurtech?
Insurtech is a combination of terms, insurance and technology. Insurtechs are technology led companies that are coming up with business models that are innovative to meet the needs of a digital savvy insurance consumer. Insurtechs provide insurance though the engagement of technology in a user-centric way.
According to McKinsey Panorama Insurtech database,2017, insurtechs are built around 3 models;

1. Working with insurers to digitize and simplify parts of the insurance value chain.
2. Acquiring customers and deal directly with insurers with the aim of eliminating the intermediaries.
3. Some are keen to disrupt the whole value chain and replace existing insurers.

Insurtechs in Kenya
In Kenya, Insurance dates as far back as 1930 when the first insurance company was founded but insurtechs first began to show up in 2015. One of the leading startups in Kenya is an insurance comparison website which attempts to solve the problem of access. This insurtech start up gives the insurance consumers a range of options for travel, health and car insurance. In short, it gives the customer, a bird’s view of the available options at a glance by aggregating the various insurance companies and their offerings.
Insurtechs are designed with customer experience at the core. Customers want services at the click of a button, personalized services, 24-hour customer service and the relevant information about a product’s pricing and benefits and insurtechs strive to meet these needs through their business models.
Insurtechs and “Insurance companies”
Insurance companies have an upper hand as most insurtechs still rely on them for major functions, including pricing and underwriting. These insurance companies have the advantage of having the financial muscle to undertake risk, experience and data that has been collected over many years.
The insurance companies have had an advantage over the insurtechs, in relation to the heavy capital requirement involved but according to Mckinsey Panorama Insurtech Database, there has been an increase in funding both in volume and value from all type of investors. The total funding rose from $140 million in 2011 to $2.32 billion (2017).
Conclusion
One of the issues that is being debated over is whether insurance companies and insurtechs need to work together or compete and how does the existing regulatory framework accommodate this change. However, the insurers should not downplay the changes digital disruption will bring and the challenges that will result.
Insurtech in Kenya has been slow to take off but there is an increase in innovative insurance solutions & platforms. Insurers in Kenya need to work with the existing insurers to develop innovation that is focused on service delivery. This will have an impact on the penetration of insurance in Kenya which currently stands at 3.1%. It will be interesting to take another look at the insurtech space again in the coming year given Kenya’s very vibrant and quickly growing startup ecosystem.
Article by Nelly Tuluba
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