What awaits insurance innovation in 2021 – a glimpse into the Idea Pulse 2021
As hands-on practitioners in insurance innovation, working with many Tier 1 carriers and reinsurers, Ninety is often asked by global insurers for an unbiased, “outside-in” view on the global insurance innovation landscape. What innovations will scale to become the industry standard tomorrow? How to separate meaningful, outcome-based innovation from the hype? To answer these sorts of questions, we introduced the Idea Pulse series last year – an annual round-up of the ‘pulse’ of innovation in the insurance industry. Now we are publishing the second edition, the Idea Pulse 2021. In this article, we want to share with you a glimpse into the intelligence the report offers. We will share with you one of our 10 Big Ideas and one of the 5 Big Bets.
Ninety’s combined private and public dataset of close to 600 innovations recorded between 2019 and 2020, reveals between 70-75 recurring themes around new ideas related to emerging risks, emerging technologies and data science advancements. The themes can be grouped into our Ten Big Ideas – a barometer of innovation priorities.
Big Idea 1: Machine Intelligence in the Insurance Value Chain
Data is at the heart of this Big Idea, which reflects the increasing integration of artificial intelligence, machine learning and data analytics across the value chain. We found a consistent pattern of AI/ML and analytics intelligence across all Ten Types of insurance innovation in some form or other. Insurers are capitalizing on historical data on hand with new sources for dynamic, actionable insights. The exponential growth in data in terms of public, private and third-party sources, the ability to extract information from structured, unstructured and even multi-media formats and, most importantly, improved data quality is increasing adoption of machine intelligence in critical decisioning applications.
While the AI/ML insurtech scene is fairly mature, adoption in the insurance industry incumbents is advancing at a faster pace now – from chatbots and voice assistants towards complex applications such as risk pricing and claims adjudication. Several VC investments, innovation labs and academic partnerships this year also continue to build on this theme. As applications move closer to “secret sauce” proprietary pricing methods, insurers are taking two approaches – building IP or leveraging partnerships.
|Innovation Ten Types||Example Themes|
|Operations & Claims||Product & Proposition||Risk Selection & Pricing||
|Added-Value Services||Customer Experience||Channel & Distribution|
American Family spun out their co-developed AI and deep-learning property analytics startup Arturo. Arturo’s AI-powered analytics generate detailed property information often in under five seconds. It enables a variety of businesses that insure, lend, invest, or manage residential or commercial properties to make more informed decisions and better manage risk with the most up to date information available.
Arturo grew out of investment and more than three years of research by American Family on the application of artificial intelligence (AI) and deep learning to satellite, aerial, drone, and ground-level imagery to accurately assess physical property characteristics for residential and commercial properties. 
This is just one of our Ten Big Ideas in Idea Pulse 2021. Be the first to get the report.
In Ninety’s view, several of this year’s Big Ideas will get bigger next year, and we will see innovation at scale in several of these themes. The Ten Big Ideas for 2020 are being developed and are on their own growth curve. In this process, though, we also came across ideas that will shape innovation themes in 2021. Most of these ideas have been growing subtly through the industry, but their momentum is increasing – influenced in part by the realities of COVID-19 – economic and otherwise. We call them “The Big Bets for 2021” – potential Big Ideas of next year’s Idea Pulse report, and perhaps the coming decade.
Big Bet 1: Intangible Assets Risks
|In 2018, intangible assets for S&P 500 companies hit a record value of $21 trillion or 84% of all enterprise value on the S&P 500, a massive increase from just 17% in 1975.|
Intangible assets for businesses such as brand reputation, goodwill and IP are well known; however insurance for these assets has not caught up with the increased risk and value on the balance sheet. COVID-19 has also brought into sharp focus other intangibles such as human capital, market and societal reputation. In the glare of social media, a tweet can cause catastrophic erosion in market capitalisation within hours, for example, and businesses need resilience similar to physical loss events. The issues to tackle are risk structure and pricing, as the share of intangibles in driving market valuation increases and with it, risk exposure and impact.
|“If you looked at a classic S&P 500 company 40 years ago, 83% of their balance sheet would have been tangible assets. Today, it’s only 12%. Insurance is pretty good at insuring the tangible, but quite challenged at finding the appropriate covers for the intangible.” -Lloyd’s of London CEO, John Neal, March, 2019
Despite the greater average potential loss to information assets of $1.08 billion compared with $795 million in property, plant and equipment (PP&E), the latter has much higher insurance coverage (60% versus 16%).
Figure 2: Lloyd’s and KPMG UK publication Protecting intangible assets: Preparing for a new reality, 2020, August 2020 (link)
Ninety is seeing a growing amount of innovation in this space, starting with IP risk coverage, particularly from specialty carriers and the Lloyd’s of London market.
|Aon plc announced the establishment of a new underwriting platform featuring the world’s largest known delegated capacity for intellectual property liability risks.
It is the latest offering from Aon to meet the changing needs of clients’ intellectual property (IP) exposures, especially in this distressed economic environment. In 2018, Aon announced the development of an insurance facility providing market-leading levels of capacity ($100 million) for IP infringement liability exposures, backed by leading Lloyd’s syndicates and led by Tokio Marine Kiln (TMK). 
Asian economies such as Singapore, South Korea and China, which are also seeing the growth of IP-driven business, are also taking proactive steps in assessing and ensuring intangible risks.
The Idea Pulse report offers the richness of nine more Big Ideas, four more Big Bets, 27 Untapped Opportunities in over 100 pages filled with industry examples and insights.