Insurance Tech Is What’s Next in Israeli Innovation

John is driving his car to the airport. He’s being very careful not to exceed the speed limit, as last month he paid higher premiums on his car insurance due to traffic violations – which his car itself reported to his insurance company.

He slides into the parking lot and parks his car. His phone’s GPS detects that he is at the airport and his insurance company sends a text notifying him that he is eligible for reduced prices on travel insurance. John assumes that these reduced rates can be attributed to being in good physical shape, as his vital signs are regularly conveyed to his insurance company’s online monitoring system through a wearable fitness band.  John suddenly remembers that he left his iPad at home, and he’s worried something might happen to it while he’s away. Again, he reaches for his mobile phone and switches on short term insurance policy for the duration of his trip, insuring the iPad. He also utilizes this opportunity to issue a temporary insurance policy for his son to drive the family car while he’s away. Since this is a new policy, John is asked to identify himself via biometric data and electronically signs the policy. John boards the plane, resting assured that he’s covered.

This may sound like sci-fi, but such a scenario could come to be just a few years down the road. But even this scenario does not begin to describe the possibilities that lay ahead of us in the world of Insurance Technology (InsurTech).  Indeed, funding in InsurTech startups exceeded $1 billion (!) in the first half of 2016 and that number will probably only rise in the coming years.

What is InsurTech?

In the industrialized world, everyone needs insurance at some point or another. Whether you are traveling, buying an expensive piece of equipment, buying a house or taking out a life insurance policy, you will inevitably have to read the policy terms and, quite possibly, file a claim. Though it touches on the most important and sensitive aspects of our life, insurance is still perceived in many cases as confusing, not particularly “user-friendly” and extremely conservative when it comes to technology. This is where InsurTech comes in.

InsurTech can mean offering the consumer “insurance on demand” (i.e., turning insurance on/off with a swipe), reduce premiums by personalizing insurance (based on physical health, driving behavior, etc.), make easy to follow price comparisons available online or on mobile phones, and can simplify the whole claims process, in “real time”.

From the carriers’ perspective, InsurTech offers new and superior alternatives to current models, including better prediction tools for actuarial analysis, price optimization, the ability to offer more on-demand “micro-insurance” products and more sophisticated tools for fraud detection and prevention.

While InsurTech offers significant potential for improving the industry, it also raises numerous questions in the regulatory and legal fields. For example, insurance companies have the ability to gather Big Data and perform analytics on them, so that they can predict risk with a great deal of accuracy and can offer lower premiums to individuals who pose less risk. Sounds great, right? But what about our privacy? What information can and should the insurance company collect? How is the company allowed to use it? Can they share it? With whom? How long can the company retain the data? Will individuals need to approve the transfer of data from one source to another? This amount of detailed, private data also raises questions of data security – what are the standards? How should a company handle a cyber-attack when such enormous quantities of critical data are compromised? What steps must they take to prevent such a scenario?

The goal of creating short, “readable,” user-friendly insurance policies aided by technology may be frustrated by cumbersome legal or regulatory demands. And what about preventing fraud when signing up for a new policy? How can an insurance company positively identify a new client? Is an e-signature acceptable?

The InsurTech Industry offers exciting opportunities and considerable challenges to what is one of the world’s largest industries. The intersection of the most cutting-edge technologies and traditionally conservative economic and business structures begs for disruption and is sure to continue to attract the attention of regulators, insurance companies, investors, and the general public for the foreseeable future.

Israel is quickly becoming a hub for budding InsurTech companies, so expect startups here to revolutionize this industry like they have in so many others. We are hosting InsurTech Israel which will explore the challenges and opportunities of this up and coming field.  The conference will be held on Tuesday, December 13, 2016, between 9:00 and 14:00 at the HFN Offices in Tel Aviv.  You can register to attend here:

JVP InsurTech Invite

About the Author
Ruly is an associate at Herzog Fox & Neeman after spending eight years as a legal advisor in one of Israel's largest banks. Ruly specializes in technology and regulation, as well as financial and banking regulations and their implications for financial institutions' information and technological procedures.