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New Paradigm in Doing Business in Insurance

Insurance is a key industry globally – and a complex, multi-layered one.
Sinay

The digital & remote inspection market is currently at USD 20 billion, expected to grow with a 9% CAGR to USD 26 billion B by 2023, according to Market Research Future.

COVID-19 accelerates the usage of remote technologies, especially for interior inspections of property losses, in parallel with increasing awareness of employees safety and protection. These together result in higher adoption of the remote inspection technologies.

Moreover, the road is already paved with significant advancements in imaging quality, robotics and other technologies – and hundreds of insurtechs are born every year globally to benefit from this growth of the remote inspections of the P&C pie….

Similar to retail and banking about 20 years ago, the insurance industry is on the verge of  shifting dramatically to complete digitalization and to remote inspections, with the aim of coming as close as possible to the Holly Grail of any underwriter: the complete transparency of their portfolio, in a clear, simple picture that not only offers the status quo, but also the strategies to leverage on and balance the risks. For example, if an underwriter understands, correlating key factors, that a specific area, normally exposed to earthquakes or strong winds, contains most of his/ her insured assets, this might give a signal of a strong need for diversification.

Can the ‚insurance dream’ of not ‚betting’ become reality? An AI-based risk scoring algorythm scores a certain risk within high-risk intervals, and if this specific risk is properly evaluated, before the policy is signed, with reasonable costs involved and significant time saving, then, yes, it can. Savings of up to 90% could be foreseen and, possibly, loss ratio improvement up to 12%. One can easily imagine the dramatically positive effort that such approaches are to make in the insurance industry.

On a global level, less than 5% of the commercial risks are inspected… pretty unbelievable, right? The rest of 95%, on a global scale, are not inspected and placed a premium price on based on the historical data, on past experience of the underwriter, on own-filled documents by the owner of the facility… and so on. Such an immense value-added industry, as insurance is, operates in ‚blind’ since ages simply because the inspection prices are prohibitive and/ or the inspection takes so long, that it might not be worth doing it after all.

Each Risk Will be Inspected Before It Is Insured

Sinan Geylani, Founder & Architect Virtual i Technologies
Sinan Geylani, Founder & Architect Virtual i Technologies

In this scenario comes a new paradigm of doing business: what if all risks are inspected, either by human eye or by computer eye and then, based on an artificial intelligence risk scoring mechanism, the policy is concluded to a fair price, both for the insured (as it might be cheaper) and for the insurer (as the loss might not occur).

To this scenario we add the capacity of process automation, of remote inspection and even of excluding the human factor from the entire evaluation process. Remote inspections could be made by the insured himelf/ herself, without an agent on the field.

All the above steps are already reality, proven by few insurtechs that took this path of remote inspections and by one insurtech whose founder believes that inspecting every single risk insured is the future: „I created this company because I do not like gambling. I am a senior underwriter professional and pretty risk-averse. I wanted that all the risks I underwrite are known to me and the price is correct for the client” – Sinan Geylani, founder of Virtual i Technologies, a Swiss-based company, voted recently in Top 20 Companies Raising Right Now by NYC Ventures (New York City Ventures).

On the note of insurance technology boost, that we currently witness, the insurtech seems to take a solid pie of financing from VCs, on a trend – yet to be confirmed – of sightly defavouring fintech. Technology solutions that will – and do – digitalize the insurance mamouth are heavily supported globally by VCs. Dedicated funds are created to support insurtech and fierce competitions arise in key insurance markets: USA and Europe.

For a steep-rising insurtech, which has recently closed its CHF 1.9 million total funding, participating in these fierce competition field and winning award after award seems natural, as AI applied in insurance, plus a smart usage of existing top-talents and top-class risk engineers around the globe, proves to be the right solution.

An authority in the field, DXC.Technology calls Virtual i Technologies „the right innovator for our times” and ACORD Insurtech Innovation state in their press release that they designated this raising insurtech winner as they have ‚the right product at the right time’.

Would this be so? Time will tell. For the time being, funds of up to USD 2 billion are pushed every year in insurtech and the trend goes towards AI. Seeing every risk seems to be ‚simply normal’ for Geylani, yet to achieve this goal easily and at affordable costs is another journey that the same founder could describe: „We have perfected our product for the past 2 years with intense R&D and testing, with top IT brains, and made money from the first year of our existence. Even with the product still in testing phase, there were several visionary insurance companies that wanted to optimize their costs and times for inspections and chose to be onboarded and to use our product. As such, I patented it and now it gains global traction”.

He founded the company in 2018, in Dubai, initially and the next year established headquarters in Zurich. Sinan Geylani harnesses more than 15 years of experience in insurance industry, having worked for multinationals such as AIG, Marsh, XL Catlin, Peppers & Rogers. In just three years since its founding, the company operates already in Europe and MENA area, having placed a solid foot in USA & Canada.

Nina Bratfalean, CEO virtual i Technologies
Nina Bratfalean, CEO virtual i Technologies

With the onboarding of the company’s CEO, EMBA and PhD Nina Brătfălean, end of 2019, Virtual i Technologies sky-rocketed in global awareness and 2020 was the strongest year of the company in terms of sales. „While passing through a pandemic year and through total resistance to (more) change of every human on Earth, we still managed to sell in value of half a million CHF and secured a 1,6 million CHF pipeline for this year. That is, clients that tested our product throughout last year onboarded on a commercial contract as of this year. January 2021 has been the best month of the company ever, with a quarter of our 2021 target secured….” states Bratfalean, in confidence.

Innovative SaaS in Insurance is the Future

„The SaaS model implemented in insurance, mostly white-labelled to top reinsurers and top brokers in the world, brings currently 50% of our revenues and is estimated to increase to at lest 60% this year, as more and more companies in insurance recognize the stringent need to digitalize, to adapt, to have full visibility of the portfolio”, states further the CEO.

How about costs? Is insurance industry willing to pay for AI-based risk scoring algorythms? „Actually, the fee is unbelievable low as compared with the advantages and the cost cuts (up to 90%!) that an average insurance company can get. The results are visible immediately and the implementation process of our platform within the client’s procedures does not come with change management requests or complicated back-to-back operations. Simply, in a week, the system is ready to use for each company; not even a download of a mobile ap pis needed”, states Bratfalean.

A New Technology Will Never Be Implemented if It Is Expensive

„This is what the digitalization of the insurance industry is all about: transparency and visibility of risks, yet with cost-cuts. A new technology will never be implemented if it is expensive and requires complex onboarding process of the client’s team. If this happened, then the technology would be killed from the very start”, concludes the CEO.

On the covid-scarred global business environment, it is a breath of fresh air to realize that internationally-based teams drive and move one of the mamouth-industries, the last pedestal remained standing.

While digitalization is easy to internalize for banking and retail, it was estimated that it would come with slight difficulty for fields such as agriculture and insurance. Huge research funds allocated, either governmentally or privately are tom ove this perception to a soon-to-touch reality, and a real-life proof is the global traction that Virtual i has gained in such a short period of time.

„One would not believe that we used to write risks without seeing them” – this is what people from the insurance industry will be saying in 3-4 years from now…. Exactly as one would say „One would not believe that we would set and go a date without mobile phones to ‚share location’.

 

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