CommerzVentures' white paper on InsuranceTech

CommerzVentures GmbH – confidential
CommerzVentures
Emerging Technologies Transforming the $4tn Insurance
Industry
A White Paper by CommerzVentures
Frankfurt, March 07, 2016

1CommerzVentures GmbH ‌ Frankfurt a.M. | March 07, 2016
CommerzVentures
This document has been created and published by CommerzVentures GmbH
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© CommerzVentures GmbH 2016. All rights reserved.

CommerzVentures
About this White Paper
This white paper was compiled by CommerzVentures, the FinTech
Venture Capital fund of Commerzbank.
Our goal is to give an overview of key technologies which we
believe will transform the insurance industry. We hope to provide
insights into their potential uses in the context of the insurance value
chain.
We hope that this will allow readers to better assess the
developments within the space.
We identified the top 50 startups in the industry. Contact us via
info@commezventures.com if you believe you should be one of
them.

CommerzVentures
Executive Summary (1/2)
•  90 percent of all the data available worldwide was generated during the
last two years. New technologies enabling the generation and acquisition
of vast amounts of new data and powerful algorithms are about to
transform the $4tn global insurance industry beyond recognition.
•  The entire insurance value chain will be transformed by technological
innovations such as artificial intelligence, connected devices, drones, new
payments, and the blockchain. Entirely new value propositions and
distribution methods will be enabled.
•  There is a huge market for startups and incumbent insurers that embrace
the new technologies.
•  Relative to the market’s size we feel confident that InsuranceTech
startups should have absorbed twelve times more funding than they have
thus far.

CommerzVentures
Executive Summary (2/2)
•  To capture this vast opportunity startups and incumbent insurers need to
establish effective cooperation models, leveraging each party’s key
strengths.
•  Effectively cooperating with startups may be the only way for incumbent
insurers to fend off potential competitors such as Google, Amazon,
Facebook and other non-traditional players.
•  By analyzing 500 InsuranceTech startups across the world,
CommerzVentures identified 50 companies that are especially well
positioned to drive innovation in insurance.
•  While one-third of these startups can be seen as disruptive to incumbent
insurers, most enable existing insurers to harness technology. Thus,
insurers have much to gain from fruitful collaboration with startups.

CommerzVentures
Contents
About CommerzVentures
Our View on InsuranceTech
Startup Landscape

CommerzVentures
  Worldwide investments in FinTech companies with a clear focus on financial return.
  Directly reports to the management board of the Commerzbank AG. Commerzbank’s CEO
chairs the investment committee.
  Fast decision-making: Direct access to decision makers in all business units. Five deals
completed in Year 1.
  Team with more than 25 years of experience in venture capital. Co-invested with Index,
Kleiner Perkins, USV, Redpoint, Sequoia, A16z.
Announced investments
CommerzVentures at a glance

CommerzVentures
Company background
 HQ in Heidelberg
 Founded: 2013
 Series A funding from CommerzVentures, b-to-v,
Acton Capital, Capnamic, Iris Capital and Partech.
 Operates in Germany. Works with 100+ insurance
companies.
Product/service
  Mobile application offering digital management and
optimization of consumers’ insurance policies across
multiple providers.
  Free for consumers, receives brokerage fees from
insurers.
Key innovations
  Easy and seamless integration of users’ insurance
policies in the app.
  Automatically discovers potential savings and
optimization of insurance coverage.
Our take-away
  User-friendly solution aiming to increase consumer
interaction with the insurance product.
  Targets relatively underserved markets such as young
professionals and first-time insurance seekers.
Insurance is one of our focus areas and GetSafe is our
first investment in the space

CommerzVentures
Contents
1.  Market Opportunity
2.  Key Technologies Along the Value Chain
3.  Which Players Will Win?
Startup Landscape

CommerzVentures
InsuranceTech is one of the two major sectors within
FinTech
Source: Swiss Re, McKinsey
•  Lending
•  Retail Investments
•  Capital Markets
•  Payments/ FX
•  Banking Infrastructure
•  Distribution
•  Underwriting & Risk
•  Claims Management
•  Risk Capital & Investment
Management
FinTech
BankingTech InsuranceTech

CommerzVentures
Source: World Economic Forum: The Future of Financial Services
“The most imminent effects of disruption will be
felt in the banking sector; however, the greatest
impact of disruption is likely to be felt in the
insurance sector”

CommerzVentures
Insurance represents the largest long-term opportunity in
FinTech
Source: Swiss Re, McKinsey
Global revenue pools ($, bn)
Payments
Investment
Lending
Insurance
481
851
1,628
4,778

CommerzVentures
Insurance CEOs feel more vulnerable to technological
disruption than other industries’ CEOs
Source: adapted from the PwC 2015 CEO Survey
Share of CEOs who see their industry vulnerable to disruption
Average of other major industries*
Banking & capital markets
Insurance
*automotive, retail, asset management, power & utilities, entertainment, pharma & lifescience, healthcare, and hospitality & leisure
60%
66%
73%

CommerzVentures
BankingTech InsuranceTech
Startup funding 2008-2015
($ bn)
Relative to industry size, InsuranceTech has received
12 times less funding than BankingTech
Banking Insurance
Global revenue pool 2014 ($ tn)
3.7
4.7
Source: Swiss Re, McKinsey, Accenture, CB Insights, VentureScanner
41
4.6

CommerzVentures
We see four generic opportunities for InsuranceTech
Source: Core Innovation Capital, Swiss Re
$3.1tn
1
2
3
4
Nature of opportunity Relevant revenue pool
$0.9tn
$0.7tn
New, tech-enabled products and business
models
Technologies to reduce risk/ number
of claims
Innovative distribution channels
Lower cost of claims processing
HUGE

CommerzVentures
Contents
Startup Landscape

CommerzVentures
Five rapidly emerging technologies are transforming
insurance
BlockchainNew Payments
• Usually based on smartphones or
card readers
• Allow quick mobile payments or
money transfers without traditional
banking
• A decentralized chain of timestamped
data blocks
• Data is automatically validated and
kept safe from alteration or tampering
Drones
•  Remote controlled or autonomous,
unmanned vehicles
•  Allow efficient oversight of individual
objects or large areas from a
distance
Artificial Intelligence
• Systems that autonomously adapt to
information and their environment
• Allows analyzing vast amounts of
data from disparate systems through
self learning algorithms
Connected
Devices
•  Includes all Internet connected
devices, i.e. wearables, smartphones,
cars, household appliances, collecting
personalized data
•  The collected data allows analytics
and informed decision making

CommerzVentures
New technologies will impact every aspect of the insurance
value chain
Source: Adapted from SMA Research, Innovation and Emerging Technologies Survey 2015, n=147 insurance executives surveyed analysis, and own analysis
Strong Impact
Moderate
Impact
New
Payments
Blockchain
Distribution
Underwriting
& Risk
Claims
Management
Risk Capital
& Investment
Management
Artificial
Intelligence
Drones
Outside of this white paper’s scope: Rather
related to asset management FinTechs
Connected
Devices

CommerzVentures
DronesConnected DevicesData from web and
internal sources
Connected devices and drones will provide new data
sources for the technologies transforming insurance
Claims
Management
Underwriting
& Risk
Distribution
•  Real-time
•  At point of demand
•  Triggered by rules or
consumer intent
•  Highly personalised products
•  Dynamic behaviour-based
pricing
•  Built-in-risk reduction
•  Faster, lower cost processes
•  Less fraud,
•  Improved customer
experience
Low cost, high
performance
computing
Data
Low cost
hardware
New
Payments
Artificial
Intelligence
Blockchain

CommerzVentures
Contents
I.  Artificial Intelligence
II.  Connected Devices
III.  Drones
IV.  New Payments
V.  Blockchain
3. Which Players Will Win?
Startup Landscape

CommerzVentures
Predictive analytics goes a step further, extrapolating
trends to predict the future
Artificial intelligence offers customer-centric use cases in
insurance distribution
Insurance use casesTechnological capabilities
• Determining over which channel customers are most
responsive and can best be reached
• Deepening of customer relationships, through KYC
initiatives and personalized contact
• Evaluating expansion targets and better preparing new
market entries
Artificial Intelligence allows effective analysis of vast
amounts of data to gain new insights
• Matching different types of insurance to create holistic
insurance portfolios and automatically suggesting new
insurance policies to clients
• Effective determination of cross-selling opportunities for
proprietary or third party goods and services
Risk Capital
& Investment
Management
Underwriting
& Risk
Claims
ManagementDistribution
Artificial
Intelligence

CommerzVentures
Artificial intelligence offers various risk-reducing use cases
in underwriting and risk
• Assessing individualized data to improve risk models
o  Reducing capital set aside for future claims
o  Individualizing all customer insurance aspects
• Forming customer portfolios with negative risk correlation
• Analysis of internal procedures to speed up processes
and reduce costs
• Providing customers with individualized plans and
strategies to reduce risk
• Helping third parties, such as doctors, combat risks
before they even emerge
Artificial
Intelligence Risk Capital
& Investment
Management
Underwriting
& Risk
Claims

CommerzVentures
Artificial intelligence reduces costs and fraud cases in
claims management
• Analyzing fraud patterns and similarities to assess which
claims are likely to be fraudulent
• Efficient comparison of contractor quality and price
• Better interaction between customers and automated
communication systems (bots)
• Predicting when and where claims are likely to emerge,
allowing more efficient capital allocation and payouts
• Automatic intelligent suggestions to clients during the
claim filing process
Artificial
Intelligence Risk Capital
& Investment
Management
Underwriting
& Risk
Claims

CommerzVentures
Contents
III.  Drones
IV.  New Payments
V.  Blockchain
Startup Landscape

CommerzVentures
Connected devices enable new business models and
communication channels in insurance distribution
• New business models, such as usage-based vehicle
insurance, become possible new offerings
• Winning low-risk customer segments with rewards for
“good behavior”
• Better insights into customer behavior and their attitudes
towards their insurer
Continuous measurement of individual data from
customers and their belongings (such as consumer
electronics or cars)
Seamless, detailed, continuous communication and
interaction with the insurer
• Push contextual insurance offerings to customers,
especially relevant for short-term instant insurance
• Offer new product bundles that combine insurance and
subsidized connected devices, to win over tech-
fascinated customer segments, such as millennials
Risk Capital
& Investment
Management
Underwriting
& Risk
Claims
Connected
Devices

CommerzVentures
Connected devices can help to improve models, decrease
risks, and create new products
• More precise and personalized risk models
• Personalized data allows insights as to how customers
can reduce risks
• Reduction of risks as devices prevent negative
occurrences, e.g. an internet-connected door detecting
robberies
• Giving customers tools to measure and improve their
health or uphold the performance of their belongings, on
a continuous real-time basis
• Creating products that are an integral part of customers’
lives
Risk Capital
& Investment
Management
Underwriting
& Risk
Claims
Connected
Devices

CommerzVentures
Connected devices can reduce fraud, while improving
customer experience in claims management
• Automated activation or validation of claims
• Existing fraud detection capabilities are improved and the
basis for new fraud detection capabilities is established
• Mobile-enabled claim activation and data input
Risk Capital
& Investment
Management
Underwriting
& Risk
Claims
Connected
Devices

CommerzVentures
Contents
III.  Drones
IV.  New Payments
V.  Blockchain
Startup Landscape

CommerzVentures
Efficient assessment of large areas or individual
objects without human proximity being necessary
Drones reduce costs and add efficiency in underwriting
and risk
Insurance use casesTechnological capability
• Substitute human with drone visits, for quicker, more
precise, and less costly underwriting inspections
• Using drones to provide data on a continuous basis to
allow for more precise analyses and predictions
Risk Capital
& Investment
Management
Underwriting
& Risk
Claims
Drones

CommerzVentures
Efficient assessment of large areas or individual
objects without human proximity being necessary
Drones improve capabilities while reducing costs in claims
management
• Substitute human with drone visits, for quicker, more
precise, and less costly claim inspections
• Increase inspections of lower-value items that would not
have been inspected previously, to reduce fraud
• Improved capabilities and reduced costs in post-
catastrophe claims settlement
• Decreased dependence on contractors’ assessments of
lower-value claims
Drones
Risk Capital
& Investment
Management
Underwriting
& Risk
Claims

CommerzVentures
Contents
III.  Drones
IV.  New Payments
V.  Blockchain
Startup Landscape

CommerzVentures
Instant mobile payments with a cost structure that
makes transfers of minimal sums possible
New payments enable new business models and expansion
into new markets
• Expansion into and increased offerings in, emerging and
frontier markets as well as among the underinsured in
developed markets, as lower payment costs and
payments of smaller sums make these markets viable
• New business models such as short-term instant
insurance
• Insurance sales with connected devices as sales
channels
Risk Capital
& Investment
Management
Underwriting
& Risk
Claims
New Payments

CommerzVentures
Instant mobile payments with a cost structure that
makes transfers of minimal sums possible
New payments offer more speed and security in claims
management
• Instant payments to customers as soon as claims are
validated
• New payout options, such as coupons
• Instant payments to contractors and claim adjusters
• Efficient cancellation of payments in case fraud is
detected
Risk Capital
& Investment
Management
Underwriting
& Risk
Claims
New Payments

CommerzVentures
Contents
III.  Drones
IV.  New Payments
V.  Blockchain
Startup Landscape

CommerzVentures
Delivery of automatic trigger points for self-executing
contracts
Keeping data safe, validated, and time stamped
Blockchain technology allows contract automation and
increased security
• Full automation of claims processing and record-keeping,
drastically reducing fraud and speeding up processes
• Full automation of contractor and adjuster contracts
• Payment validation and documentation
• Heightened security of internal and external data as well
as processes
• Drastic reduction of paper based information and
processes
Risk Capital
& Investment
Management
Underwriting
& Risk
Claims
Blockchain

CommerzVentures
Contents
Startup Landscape

CommerzVentures
Incumbents, big tech companies, non-obvious entrants and
startups will shape insurance to varying degrees
Capital
Novel data
Historical data
Regulation
Innovative
capacity
Customer
acceptance
Business model
fit
• To assess what role each of the players is likely to hold, we compared the insurance-specific
strengths and weaknesses of each type of player
• The strengths and weaknesses are summarized along criteria essential to shaping the future of
insurance, in a radar diagram

CommerzVentures
Incumbent insurers have recognized the potential of
technology, but are limited in their innovative scope
While incumbent insurers are willing to implement changes, they are likely to require
partners for innovation
Source: Bain & Company Global Digital Insurance Benchmarking Report 2015
• New technologies are often relegated to being topics of
future instead of current importance
• 60% of insurers feel they lack the internal capabilities
necessary to allow digital transformations
• Many insurers are limited in implementing technologies
due to legacy IT and paper-based infrastructures
• Insurers generally lack the ability to use data from new
sources such as social media or wearables
• Organizational inertia prohibits full-scale innovation
• Incumbent insurers possess capital, historical data sets,
regulatory knowledge, and a customer base, which
ensures them a major role
• Most insurers realize the potential and importance of
technology
• Some insurers have begun to actively search for and
integrate technology by directly investing in startups,
using accelerators, or by forming internal innovation
teams
Capital
Novel data
Historical
data
Regulation
Innovative
capacity
Customer
acceptance
Business
model fit
+ -Positive drivers Negative drivers

CommerzVentures
• Vast amount of consumer and GIS data, along with
cloud computing would allow insurance to be based on
more precise risk models, and to be sold using
contextual triggers
• These companies possess large, loyal customer bases
and understand customer needs
• Google has driverless cars and smart home devices,
while Apple has its Healthkit initiative, both of which
may serve as entry points
• Directly offering insurance would cannibalize
advertisement revenues and may not be a good fit for
brand images
• Strict unharmonized regulations make global expansion
difficult
• Building up historical data sets would take much time
• Insurance is not perceived as attractive to internal
engineering teams
• Limited commitment has been shown thus far
Big tech companies (Google, FB, Apple, Amazon) have vast
data resources, but are unlikely to fully enter the market
It is unlikely that big tech companies will enter insurance on a large scale, instead they
will form partnerships to create more accurate risk models
+
Capital
Novel data
Historical
data
Regulation
Innovative
capacity
Customer
acceptance
Business
model fit
-

CommerzVentures
Telcos, vertical entrants and other financial service
providers will gain importance
Direct full scale entry is unlikely; however, limited-scope involvement is probable for all
of them
• They possess vast stores of data that can be used
to create more precise risk models
• Burdensome regulation, lacking historical data and
expertise, as well as unaligned business models
+
TelecomVertical
entrants
FS
providers
Capital
Novel data
Historical
data
Regulation
Innovative
capacity
Customer
acceptance
Business
model fit Telecom
Vertical entrants
Financial service
providers
-
• Burdensome regulation, lacking historical data and
expertise, as well as unaligned business models
• Involvement is legally prevented in many countries,
furthermore negative public images make competing
with established and trusted insurers difficult
• Some industries, such as the automobile,
healthcare, or real estate industries may directly
offer insurance related to their products
• Financial institutions posses the capital and data
related capabilities to become active in insurance

CommerzVentures
• Many startups have the capabilities and expertise
necessary to develop and market new technologies
• Systems and processes can be created from scratch
without preexisting legacy structures
• Many of the new insurance-shaping technologies
require limited capital and manpower to develop
• Startups understand and deliver customer centricity
• Funding for the InsuranceTech industry has been
increasing
• Regulatory requirements are very high, creating
significant barriers to full-scale entry
• Attaining the historical data to develop risk models is
challenging
• Regulation severely impairs expansion across
international and even intra-national state borders
• As insurance is largely based on trust there may be
some biases against young companies’ untested
concepts
Source: Bain & Company Global Digital Insurance Benchmarking Report 2015
Startups are best positioned to innovate, either enabling incumbent insurers or
disrupting individual parts of the value chain
Startups will drive innovation and form partnerships
+
Capital
Novel data
Historical
data
Regulation
Innovative
capacity
Customer
acceptance
Business
model fit
-

CommerzVentures
Contents
Startup Landscape

CommerzVentures
Characteristics of promising InsuranceTech
startups
• Impact: potential either to enable or disrupt the
insurance value chain by using technology
• Focus: Innovative and clearly defined business model
• Setup: Young and independent companies led by
entrepreneurs
• Outlook: Successful exit conceivable for (prospective)
investors
CommerzVentures identified the 50 most transformative startups along the
insurance value chain; contact us if you think that you should be one of them

CommerzVentures
Most of the 50 leading InsuranceTech startups are active in
distribution and enable insurers, rather than disrupting them
50%
32%
13%
5%
Share of startups along the value chain
Distribution
Underwriting & risk
Claims management
Risk capital & investment management
68%
32%
Share of enablers vs disruptors
Enablers Disruptors

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