Verily, a subsidiary of Alphabet Inc, will launch a health insurance company based on its data science expertise. And this suits the fact that customer willingness to purchase insurances from Big Techs has risen from 17% to 44% in recent times.
As part of its response to the Covid-19 Coronavirus pandemic which has been having such disruptive effects on every aspect of our lives, the insurance industry has been taking steps to accelerate its digitalization efforts, seeking support from insurtech companies and generally preparing to scale up. But as the boundaries between established insurers, insurtechs and Big Tech become increasingly tenuous, the Big Techs themselves are beginning to make their presence felt in the industry.
In 2019, life sciences research organization Verily – a subsidiary of Google’s parent company Alphabet Inc. – partnered with Boston-based John Hancock Life Insurance to offer a life insurance product for customers with diabetes that it claimed would leverage the capabilities of Onduo, a virtual diabetes clinic which is a joint venture between Verily and drugmaker Sanofi. Then, in August of this year, the company announced it was forming a subsidiary health insurance company called Coefficient Insurance which would be backed by a minority investment from Swiss Re and which would use its data science expertise to offer stop-loss insurance, a segment of commercial insurance that protects employers from large employee health benefit claims by reimbursing them for claims over a defined limit. Coefficient aims to use an analytics-based underwriting engine to combine innovative health technology solutions with novel insurance and payment models.
Insurance has often proved itself to be a difficult sector to break into and experts note that the industry’s capital and regulatory requirements may deter Big Tech companies from becoming licensed insurance companies or taking on significant underwriting risk. But Big Tech has a range of powerful tools at its disposal, and the role it has played in offering customers services over the period of the pandemic seems to have had a noticeable effect on public perception. In fact, Capgemini and Efma’s 2020 World Insurtech Report shows that customer willingness to purchase insurance from Big Techs has risen enormously over the last 4 years, from only 17% in 2016 to 44% as of April 2020.
And Google isn’t the only big tech company with an eye on moving into the insurance market. In July of this year, Tesla announced that the company was preparing to launch what its CEO Elon Musk described as a “major insurance company” that would use data harvested from its vehicles to offer cheaper monthly premiums. Moreover, in some countries online shopping and streaming giant Amazon has also begun offering customers insurance for cars and motorbikes through its popular Amazon Pay service.
The tech giants’ ability to bring together big data, healthcare and insurance gives them powerful advantages in the kind of focused insurance sectors that companies like Coefficient target, and they are well-versed in providing real-time responses, innovative customer care and satisfying digital experiences. For established insurers to compete, mastering these new competences will be increasingly essential as innovative digital products and data-driven hyper-personalization become more and more central.
Customer expectations and the insurance marketplace are both evolving rapidly, so innovation, partnerships with tech partners, a culture of open access and the ability to stay ahead of trends are more important than ever. To stay in the game, insurance companies need to strengthen their rapport with their customers – and that means keeping up with the developments in insurtech, customer service and connectedness that Big Tech is already starting to exploit.
