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Neo Insurance
Overview
Novel insurance models are providing coverage for the connected consumer
Neo Insurance refers to a fully digitized insurance product and service provided entirely through digital channels. These new insurance models in the personal lines insurance segment use new technologies and focus heavily on customer experience by providing personalized products that reflect individual circumstances better, allow for instant coverage, feature faster claim processing, and are delivered digitally. They aim to overcome the pain points of traditional insurance where policies are offered based on a one-size-fits-all approach.
Neo Insurance has largely been enabled by the emergence of insurance technology (insurtech) solutions, which make use of technologies such as Internet of Things (IoT) devices, artificial intelligence (AI) and machine learning to automate insurance functions and gather data in real-time, which can lead to more accurate pricing and faster claims processing. On the demand front, consumer expectations for more personalized policies and cost savings for insurers, arising from digitizing insurance functions, have created strong demand for neo insurance products and supporting infrastructure solutions, while inadequate coverage provided by traditional insurers for non-conventional industries, such as ridesharing, have paved the way for new opportunities for neo insurers.
Industry Updates
Market Sizing
The US Neo Insurance market could reach USD 72.3 billion–88.4 billion by 2027
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Market Mapping
The Neo Insurance industry can be segregated into companies offering digital-only personal line insurance offerings and companies providing infrastructure solutions for digital insurance services. Digital personal line insurance providers consist of companies offering home, auto, life, and miscellaneous (pet, electronics, and bicycle) insurance, as well as those providing comparison sites to assist individuals in comparing and shopping for insurance. Solution providers include those that offer turnkey solutions to launch digital insurance products and providers of technology solutions for underwriting and claims processing processes.
Underwriting solutions accounted for the highest number of startups, with these companies using technologies such as AI and alternative data to better price policies according to individual customer needs. This was followed by the auto insurance segment, which offers usage-based insurance (UBI) using telematics data. Moreover, the majority of startups identified in the Neo Insurance industry are in their early or growth stages.
Incumbents have also been quick to react to changing market dynamics, especially in the automobile space, where most companies have either developed solutions in-house or partnered with turnkey solution providers and vehicle manufacturers to offer usage-based insurance offerings. Vehicle manufacturers, such as Tesla, have also ventured into this space, leveraging data from their own connected vehicles.
The Disruptors
Funding History
Competitive Analysis
Incumbents
Traditional insurers are opting for a mix of in-house development and partnerships to provide novel products
Incumbents in this space mostly include traditional insurers who are increasingly moving towards developing their own digital, neo-insurance products. Partnerships with digital insurance technology (insurtech) startups are common in instances where incumbents want to leverage the former’s technologies to offer new insurance products or bolster their own offerings. Cross-industry partnerships are also ubiquitous, providing a venue for these traditional insurers to market their product, with common examples including partnerships with auto manufacturers and ridesharing companies.
Most incumbents also have their own venture capital arms and accelerator programmes which provide guidance and capital for promising insurtech startups.
Tesla is an example of a vehicle manufacturer developing its own insurance product which leverages the data from the vehicle's systems. This also provides Tesla with a feedback loop which can then be used to alter its vehicle designs to mitigate common repairs in the long term.
Reinsurance incumbents complement their reinsurance offerings by providing digital solutions to insurers, these include turnkey solutions to implement a new digital insurance product (such as usage-based insurance) or platforms for data analytics and risk management.
Notable Investors
