In Part 1 of our Artificial Intelligence (AI) Impact on the Insurance Value Chain series, we looked at the impact it has on underwriting and risk. However, before an individual can be underwritten, an insurance product still needs to be sold and distributed, which is what Part 2 of this series will focus on. According to McKinsey, this step of distribution and selling is the most crowded in insurtech, with nearly 40% of startups attempting to change how consumers buy insurance.
Leveraging existing platforms
The MIT-founded Insurify is an auto insurtech that closed a $6M financing round in May from Massmutual and Nationwide, and has since launched a virtual assistant on Facebook Messenger. This virtual assistant acts as a broker, interacting with the consumer via Facebook Messenger to assess their cost and policy benefit preferences. These preferences are used to determine potential insurers for the consumer, which are then recommended based on the insurer’s customer service and product reviews.
By using AI and natural language processing, Insurify was able to analyze over 20,000 car insurance chat conversations to build the virtual assistant. With over 70% of American consumers shopping for their auto insurance online in 2015, Insurify's goal was to simplify and speed up the purchasing process to capitalize on the $215B auto insurance industry.
You make also like: Blockchain & Insurance Use Case Project
Creating innovative platforms
By contrast, New York based Lemonade opted to build its own distribution platform. Its mobile application allows an insured to purchase renters or home insurance in under 2 minutes, exclusively interacting with Lemonade’s AI chat bot Maya. Lemonade has raised $60M from venture capital heavyweights Google and Sequoia, as well insurers XL and Allianz. Only time will tell which AI distribution platform is more effective, Facebook Messenger or a company-developed app. However, with 84% of a mobile user’s time spent using just 5 applications, with Facebook being the top application, the Facebook Messenger AI distribution play appears to have a head start.
Artificial intelligence insurtech startups have continued their fundraising hot streaks, with Canadian based Mylo raising $750K last week. Close to $400M has been committed to AI research and innovation since 2017, positioning Canada to become a global hub. All in all, Mylo is just the beginning for Canadian insurtechs. All around the country, moves are being made to invest:
The Government of Canada funded a $125M strategy to attract and retain top talent, as well as burgeon research into the AI space.
- In early May, the Quebec government launched a committee to spearhead research and innovation in AI, backed by $100M.