Status of the Canadian InsurTech Landscape (Part 3) — InsurTech Segmentation by Function

Published in

Luge Capital

8 min readJan 25, 2021

We recently launched our 2020 Status of the Canadian InsurTech Landscape report that dives deep into the InsurTech ecosystem here in Canada. We thought it would be great to highlight some parts of the report through a Medium blog series.

For this third part of the series, we will discuss InsurTech startup activity in each major function within the insurance industry in Canada.

We segmented the InsurTech startups in Canada according to their role in the insurance value chain. We defined seven categories based on the startups evaluated namely: (i) distribution, (ii) digital augmentation, (iii) process automation, (iv) data & analytics, (v) new segments & products, (vi) underwriting, (vii) claims and (viii) payments. This is not an exhaustive list of categories however, we felt these were the important functions to highlight. Some of these startups could be categorized into more than one group, but for our analysis, we segmented them into one category each.

Distribution

Distribution is one of the key elements to drive insurance sales. Typical forms of distribution are complex, expensive, involve several participants in the supply chain and are rather opaque. As a result, a whole category of startups have emerged to facilitate insurance product distribution through the use of new technologies. The majority of startups in this category are building their own digital distribution channels, using a brokerage or MGA model. Some of these “digital distributors” have a straightforward value proposition in terms of providing an avenue through which customers can easily compare quotes and purchase policies. Examples of this include InsureGo (home and auto), Allset (tenant), PolicyMe (life) and Goose Insurance (travel medical). Other “digital distributors” offer a broader set of solutions to its target customer and sell insurance as a part of an overall value proposition. For example, Humi provides an all-in-one HR, payroll and benefits management platform for businesses. As a part of its solution, the company offers benefits brokerage services. Another example of this is Boxx Insurance, which allows businesses to monitor their cyber health, educate employees on cyber threats and purchase cyber insurance.

Distribution is the largest category within InsurTechs startups in Canada. This is not surprising as the majority of the initial innovation in insurance started with the idea of giving customers a digital shopping experience. Despite the large number of InsurTech startups in this category, not all insurance products can be distributed in a fully digital fashion in Canada today. There are a myriad of reasons behind this including age-old regulations that are slowly evolving³³. The famous “pink slip” that demonstrates proof of auto insurance, for example, had to be mailed physically until very recently³⁴. Some insurers’ processes are still manual as well — for example, some insurers will still physically send copies of insurance policies to their customers via snail mail, although this is gradually changing. In life insurance, the need for collecting fluid samples inherently means that the customer experience will not be completely digital until alternative methods of adjudication are broadly adopted. Given these and many other factors, we believe that many stars will need to align before the Canadian consumer can have a truly digital, self-serve insurance purchase experience.

Digital Augmentation

We use this category to define startups that enable or improve the digital distribution capabilities of incumbent brokers and carriers, or digitally augment the internal operations of these entities. For example, Breathe Life provides white-labelled solutions to life insurers, banks and advisors to sell policies online. The company, which announced a partnership with insurer La Capitale in 2019³⁵, enables online application and quoting systems, and marketing analytics tools. Some startups have adopted a combined model of tech-provider and MGA. For example, Finaeo, which offers life insurance advisors an online marketplace for insurance products, customer onboarding tools, an FNA tool, product recommendation engine and customer relationship management system. Apollo follows a similar model for the P&C insurance space.

Digital augmentation is a growing segment within InsurTech as startups are developing tools to enable carriers and intermediaries to thrive in an increasingly digital environment.

Process Automation

This category consists of startups providing technologies to help improve the workflows and reduce inefficiencies of incumbent players in the industry. There is a wide variety of technology providers within this category addressing various pain points. For example, InsurTech startup ProNavigator helps brokers get quick answers to underwriting and insurance product related questions from multiple carriers on a single platform using natural language understanding (NLU). Rather than spending considerable time logging into different carrier portals or calling their underwriting departments, a broker can get their questions answered on ProNavigator’s platform. Another example is Relay, which provides an end-to-end SaaS platform to help ceding teams of insurance carriers structure submissions, receive and negotiate quotes and secure reinsurance.

Data & Analytics

The use of alternative datasets within insurance has become a prominent theme in the last three years. Several InsurTechs are either providing access to alternative data, improving data collection, or offering tools for more efficient data usage and analysis to help insurers with risk assessment. An example in this category is Vivametrica, a health analytics company that measures and predicts health risk, outcomes and longevity using data from personal sensors and wearables³⁶. Another example is Baseline, which provides connected car insurance solutions for both personal and commercial auto insurers. Carriers deploy Baseline’s products to promote positive driving behaviour among their insured customers, give rewards and offer pay-per-use insurance.

New Segments & Products

A few startups are introducing or enabling the introduction of new types of insurance products into the market. Their goal is to address new market segments that require insurance and are currently underserved. Some are offering adjacent products that act as “add-ons” to traditional insurance products. One example of an InsurTech startup introducing a new product is Livelii. It provides invoicing and payment processing solutions to freelancers. Those workers can earn rewards by using Livelii, and fund a health and dental benefits plan. Slice Labs, another example in this category, offers on-demand insurance products such as home-share and ride-share insurance directly to consumers. It also allows carriers to white-label its on-demand distribution platform to enable the distribution of their own on-demand products. Notably, the Co-operators Group has launched its on-demand insurance brand Duuo using Slice Lab’s cloud platform, which distributes event, vendor and short-term rental insurance.

Underwriting

Due to the complexity and proprietary nature of underwriting, only a handful of startups are offering solutions focused on the underwriting function in insurance. Underwriting, the heart of the insurance business, is often retained within the walls of an insurance carrier. It is primarily an internal function of carriers that help them assess risk and determine price. Development or sales of underwriting technologies to insurers can often be a difficult job for startups. InsurTech startups are rarely able to receive access to historical performance data from insurers to help develop their softwares. Getting insurers to adopt underwriting solutions from external third parties is also a difficult process since this is their bread and butter.

That said, there are a few InsurTechs that are seeing traction in this space. Element AI, an artificial intelligence advisory firm and software developer, has created its “Element AI OS for Insurance” which can be used by insurers to optimize underwriting processes and increase throughput by leveraging AI capabilities. Another startup, Foresight Analytics, has developed a technology to help insurers better underwrite commercial auto insurance, a line of business which has posed some unique challenges for insurance carriers in recent years in both Canada³⁷ and the U.S³⁸. Some of these challenges include cross border exposure, distracted driving, higher repair costs of more sophisticated vehicles, increasing claim severity and trucking companies hiring less experienced drivers due to driver shortage³⁹.

Claims

The insurance claims process is one of the very few touchpoints that an insurer has with its customers after the sale of a policy. Therefore, it is important for carriers to provide an excellent, fast and transparent user experience throughout the claims process, ensuring long-term customer retention. However, only a few InsurTechs in Canada are addressing this specific function and most of the solutions relate to workflow improvement or fraud detection. Encircle, for example, provides workflow automation technologies for claims adjustment. It connects insurers, restorers and policyholders on one platform where they can document losses, access photos and sketches, generate reports and communicate with each other. For better fraud detection, Owl.co provides its technology to insurers so they may accurately flag suspicious insurance claims in order to better allocate fraud team resources for investigations.

Payments

The payment function consists of premium payments and claims payouts. In various cases, insurers are still using paper cheques to collect premiums or disburse claims. Paying claims via cheques is not only an administrative burden but can delay settlement by up to 7–10 days, which results in dissatisfaction of the policyholder. A few startups in Canada are attempting to change this. For example, SimplePin helps brokers and insurers collect premiums seamlessly online. Dream Payments offers omni-channel disbursement solutions for claims payouts. Aya Payments allows employees to receive their Health Spending Account allowances through a prepaid debit card where claims are adjusted automatically using receipt images.