An insurtech innovation panel debate at the GAIF34 event in Oman emphasised ways forward for insurtech, and AI in particular, to demonstrate the most value to insurance in the shortest time possible.

GAIF34 insurtech panel day 1

Insurance technology investment should focus on the here and now, rather than medium or long-term projects, in order to secure investment, a panel session at the General Arab Insurance Federation (GAIF) conference in Muscat has emphasised.

The 34th GAIF conference is being held in Oman, with more than two thousand delegates from insurance companies across the Middle East and beyond descending on Muscat, more than two decades after the city last played host to GAIF in 2002.

Insurtech has received “pushback”, in terms of investor caution among venture capital funds (VCs), suggested Hitesh Kotak, chief executive, India, Middle East and Africa, Munich Re.

That pushback has included ongoing conversations among incumbent insurers about how to make best use of emerging technologies, particularly around artificial intelligence (AI), suggested Hitesh Kotak, chief executive, India, Middle East and Africa, Munich Re

“The whole euphoria for insurtech, two or three years ago, has cooled down,” said Kotak.

“The principal reason for that has been that at the beginning the whole narrative about insurtech was that it would democratise insurance and it would disrupt insurance. Between fintech and insurtech, the biggest difference is that ours has a very high level of pushback,” he said.

Demand for fintech in banking has steamrolled such pushback in that sector in comparison to insurance, he suggested.

“The funding is available to those insurtechs that are adding value now and not three, four or five years from now. I think it’s important for all the investors of insurtech to figure out where value can be found immediately,” he added.

Claims should come first

Kotak was asked by host Roland Zaatar, CEO, Arabia Falcon, an Omani insurer, in which area AI could have greatest impact in driving growth within the insurance value chain. The focus should be on the consumer claims experience, Kotak emphasised, although “[AI] will be super critical” across the industry, he explained.

“Since we are handling so much data, if you want to make the most impact on the consumer, claims would be the most impactful area where we can introduce AI,” he said.

Fewer questions should be asked, and more external data sources used, such as geospatial and location intelligence, Kotak suggested.

“Information required to settle the claim can be collected from external sources. Secondly, profiling of the customer so that we don’t use the same process for all the customers we have,” Kotak said.

A “top cohort” of lower risk customers, would get fewer questions, he noted, with more use of the more sophisticated external data, while SMEs would get a mix of questions plus use of external data such as credit scoring databases.

Meanwhile, “more intense” claims questioning would be reserved for high risk retail business at the bottom edge of the risk profiling approach, he suggested.

“Claims will be a very challenging journey, but if you’ve cracked that, then we can improve or reduce the trust deficit that we as a sector have with our consumers globally,” he added.

AI is already helping root out fraud within health claims, suggested Lars Gehrmann, chief digital officer, head of QIC Digital Venture Partners, Qatar Insurance Group.

Winning a VC

Asked a question about barriers for insurtech startups, Gehrmann stressed that gathering data together into a compelling proposition to present to insurers “is the key challenge”.

“Until recently, we trusted the insurtechs to come up with clever ideas, and initially they came to us and said, ‘you want to sell me something, I have the data’, which leads to a chicken and egg problem,” he said.

“Instead, I think insurance companies have access to AI possibilities in the cloud, and can do a lot of things on their own. The key challenge for me is really how can insurtech be more innovative,” Gehrmann said.

“How can [an insurtech] be more innovative than a classic incumbent [insurer]? It’s easy, because they are not as fast as an insurtech, needing weeks and months to follow a project through,” he added.

It is “not at all” easy for Middle Eastern and North African (MENA) entities to attract insurtech investment through VC funds, he suggested, which lack knowledge of the sector compared to the well-trodden world of banking fintech.

“The classic VC, even a fintech VC, just doesn’t understand insurance,” Gehrmann said.

Such VCs “invest once and never again” in insurtech, he suggested, often viewed as a small-scale portfolio diversifier for their other fintech or other technology investments.

“We saw this in the insurtech landscape in MENA region in the years 2016 to 2021. The big VCs partnering with us invested a little, but then didn’t put anything more money in after that,” he said.

More cautious VCs will sometimes follow a leader, once an insurtech investment begins to look like a winner, he suggested.

“Two of our startups, one from Saudi one from UAE we invested in have got [VC] money. It’s not that you cannot get money, the question is with whom do you partner to get things done? You need to find the right VCs,” Gehrmann said.

He cautioned that not all startups require VC capital to flourish, with some  so-called angel investors from within the industry willing to “put in the time”, while accepting slower growth rates, to develop specific insurtechs to fruition.

Technology partners are not all startups, and incumbent technology firms, such as Cisco Systems, a cybersecurity service provider, has also been busy investing in startups – by buying several of them.

Fady Younes, managing director, cybersecurity, EMEA, Cisco Systems, explained that his firm had made “a series of acquisitions of innovative startups” within the past year.

“In 2023, we acquired six online security companies, startups that were extremely innovative,” Younes said.

The company is developing the use of AI to drive cyber risk management efforts, he emphasised. At a recent Cisco event in Amsterdam, the firm announced a cyber “security AI assistant”, he said.

Intelligence about the threat environment, including AI, provided to businesses, is driving online security and resilience to cyber risks, he emphasised.

“Security resilient architecture requires a change in mindset, and the shift from adopting point products and to integrated architectures,” Younes said.

“It requires a shift from only focusing on prevention, to rather focusing on detection and the speed of detection response,” he continued.

He added: “Finally, the scarcity of cybersecurity experts means it’s important we stop treating all alerts the same, but rather prioritise them based on business context – and that is through automation.”