Established insurance companies are increasingly investing in new technology to increase engagement, improve underwriting and offer discounts on premiums.

One company at the forefront of the trend is Vitality UK, a spin off from PruHealth and PruProtect under the global Discovery brand, which bought itself out in 2014 and launched as VitalityHealth and VitalityLife. Since then, the company has focused on customer engagement via its website and mobile app, with healthy living assessed via fitness trackers and rewarded with discounts and offers.

Dave Priestley, chief digital officer at Vitality UK, explained that integrating with wearable technology - so-called ‘earn and burn’ - results in activity rewards on a monthly basis and status rewards for bigger ticket, less frequent things.

“It’s unbelievably powerful in terms of behaviour change,” he commented, adding that younger people have been particularly enticed by the package.

Priestley admitted that the business has not yet mastered the cross-selling aspect of this engaged insurance model, but in terms of wearable technology integration he argued competitors haven’t caught up to Vitality.

“Most insurers are focused on the back office process, claims processing, etc,” he stated. “We’re working on things like a virtual GP service, with remote diagnostics, skin analysis for possibly cancerous moles, then things like voice activation and AI chatbots – we’re always looking to work with FinTech partners on these things, to complement our core competencies.”

Another incumbent insurance company embracing InsurTech is Zurich, whose head of UK innovation Mark Budd said that it launched an ‘internal foundry’ at the start of the year, looking for commercial value at various points in the insurance process.

“This also has the benefit of not having to fit into the usual annual funding process, so we can make mistakes and move on quicker,” he stated. “Many companies are still locked in the business case-funding proposal-three-year project cycle, which often fails to capture the benefit of technologies when they’re fresh.”

The company also recently announced its Zurich Innovation World Championship, a global competition to collaborate with the brightest and best InsurTech start-ups and entrepreneurs.

Budd explained that Zurich is targeting three areas for investment – wearables, telematics in cars and smart buildings.

“We’re starting to look at whether wearable technology can better evidence management of medical conditions – diabetes risk for instance can be moved to a different risk pool with lower premiums,” he said. “It’s a similar story with telematics in cars - rather than give premium discounts for good drivers - as this is effectively a race to the bottom for insurers - there’s added value and retention benefits in offering vouchers for places people visit, like a particular coffee shop for instance.”

In terms of connected homes, Budd said again this is about the additional insight. “Rather than the sensors just passively telling people about heating or leaks, they can be used in a more proactive way, telling them when they’re kids are home, making them feel protected.”

As for voice technology, Zurich has travel insurance quote capability on Alexa, but Budd commented that there are still a few too many steps in the process for the technology to be rolled out across other product types.

Other major insurers have been partnering with InsurTech startups to aid their digital transformation.

Just in the last couple of months, AXA’s InsurTech startup studio Kamet was the main investor an €8 million Series A funding round for insurance-as-a-service company Setoo.

“Our investment in Setoo supports AXA’s strategy to build more impactful insurance platforms as one of our four key priorities for innovation and to become a partner for the end customer,” commented Guillaume Borie, chief innovation officer at AXA.

Meanwhile, AIG Life partnered with Yulife to create a new insurance proposition for the UK market. Launching later this year, the startup provides life insurance and wellbeing tools to businesses and consumers, delivered instantly via mobile technology.

Yulife plans to motivate customers to keep holistically healthy, and is working with wellbeing brands and ambassadors to develop incentives via its app. The firm’s founder and former founding-chief executive of Vitality Life, Sammy Rubin, stated: “Rapid advances in consumer health technology and shifting attitudes mean that people want more from their insurance company – we want to rise to that challenge and help our customers to be the best version of themselves.”

The Association of British Insurers’ assistant director and head of strategy, data and analytics Matt Cullen previously argued that the industry is currently ripe for such deals. “There’s a realisation that the traditional players need help, while at the same time, some of the more bullish startups which were looking at insurance have realised it’s not so easy – so there’s lots of collaboration happening to exploit synergies.”

The latest Willis Towers Watson market analysis suggested that there was a total of 71 InsurTech funding transactions during the second quarter of 2018, marking a record high, along with a new record for the volume of incumbent participation in InsurTech investments.

This backed up KPMG’s first half FinTech report’s findings, which showed that InsurTech companies attracted a significant amount of investment during the last six months, including $100 million+ ‘megarounds’ for Oscar and Lemonade.

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