This March, The Fintech Times is shifting its spotlight towards insurtech, exploring the potential impact of blockchain technology on insurance processes and its role in instilling trust in digital transactions.

As insurers strive to meet the evolving needs of a digitally-savvy customer base while addressing the persistent challenge of financial inclusion, they are increasingly turning to fintech solutions.

These innovative technologies not only enable insurers to streamline operations and enhance customer experiences but also play a pivotal role in extending financial services to underserved communities.

Let’s delve into how industry observers say insurers are leveraging fintech solutions to bridge the digital divide and enhance financial inclusion.

Tailored options

Janthana Kaenprakhamroy, CEO and founder of insurtech Tapoly, addresses how insurers are offering tailored digital insurance options, innovative distribution channels, and advanced technology solutions.

“Insurers are increasingly turning to insurtech solutions to address the challenge of closing the protection gap and promoting financial inclusion, especially in underserved regions. By leveraging fintech innovations, insurers can bridge the digital divide and extend insurance services to populations with limited access.

“These solutions enhance accessibility by providing digital insurance options tailored to the needs of underserved communities. Insurtech enables insurers to offer simplified and cost-effective insurance products, making them more accessible to individuals who were previously excluded from traditional insurance markets.

“Additionally, insurtech facilitates innovative distribution channels and advanced technology solutions, ensuring that insurance products reach remote and marginalised populations. Overall, the integration of insurtech in the insurance sector is instrumental in narrowing the protection gap and promoting financial inclusivity on a global scale.”

Making inroads

Technology simplifies insurance, aiding inclusion, particularly in underserved regions, with embedded products enhancing accessibility and family wellbeing, says Darran Simons, head of insurance, EMEA at data analytics company FICO.

“Insurance policies and products can often be complex, high-touch, and very time consuming. Insurers can leverage technology solutions to both design and offer products that are easier to understand and to purchase. For example, a property policy may have historically required physical inspections, but now that same information might be available directly from public or private third party databases.

“Similarly, there might be enough application and public information available on applications for some types of life or health insurance that may not require time-consuming medical testing. By identifying the kinds of policies that can make a difference in underserved regions, and then utilising the technologies, platforms and analytics that are available in the marketplace today, insurers can make bigger inroads into inclusion across all socio-economic groups.

“We are also seeing this leveraged with the increase of embedded insurers products making insurance more accessible in some regions, and aiding typical demographics that might previously forego vital protection products to support the wellbeing of them and their families.”

Flood risk

Bob Schiller, director of product innovation at insurer SageSure addresses the significant gap in flood insurance coverage by highlighting the role of data in accurately assessing flood risk and facilitating insurers’ adaptation to evolving risks.

“For flood insurance specifically, the gap between the number of homeowners exposed to some level of flood risk and the number of homeowners who have flood insurance is vast. To date, only five per cent of homes in the US and 30 per cent of homes in FEMA-designated high-risk flood zones have flood coverage even though 99 per cent of US counties are impacted by flooding. Recent studies have shown that compared to FEMA estimates, there are 1.7 times more properties that have substantial flood risk.

“Data can support efforts to assess flood risk more accurately, especially as the risk itself continues to evolve. As data increases insurers’ ability to adapt to changes in risk, and as models are updated on a much more frequent basis, decision-makers throughout the insurance value chain are better positioned to educate consumers and connect them to solutions that address their home’s exposure.

“Many insurers are developing competitively priced private flood insurance products that leverage the latest advances in flood risk modeling, which will continue to support efforts to increase flood coverage take up and close the protection gap.”

Harnessing technology

Rob Bauer, group chief MGA officer at international insurtech bolttech, says technology is critical to closing the protection gap, which Swiss Re quantifies at $1.8trillion up from $1.3trillion, just a few years earlier.

“We’re beyond refrigerators telling owners that a critical part is about to fail, or the warranty needs an update. In the developing world, mobile phones can self-diagnose screen damage, and activate a repair network with little human intervention.

“Life insurers are using inputs from wearable technology like Apple Watches to alter mortality tables, which drives precision-pricing and risk selection. For example, if technology can show an individual has run five miles, each under eight minutes, three days a week for the last three months … do you need a comprehensive medical exam?

“Insurers are figuring out how to use the tsunami of data at their fingertips, and make it meaningful to better risk-select, underwrite, and price.”

Brokerage strategies

David Embry, CEO and founder of insurance broker Mylo, says:  “Many small businesses and individual customers have traditionally gone unserved because agencies can’t efficiently grow their own businesses and process a high volume of these often complex transactions.

“Technology is changing this equation – providing an easy and cost-effective way to analyse customer needs quickly, streamline the underwriting process, match needs with carrier appetites and more.

“We have been able to scale while giving underserved customers the personalised guidance and expert solutions they need. Our insurance intelligence engine efficiently analyses data, makes expert coverage recommendations, and matches needs with personalised solutions from more than 100 leading carriers.”

Influence of gen AI

Elad Tsur, a serial entrepreneur specialising in machine learning, big data, and AI, is the CEO and co-founder of Planck, an AI based data platform for commercial insurance. He foresees a substantial decrease in insurance premiums, driven by the widespread adoption of GenAI.

“I believe GenAI adoption is going to dramatically impact overall loss ratios. It will improve loss models and play a huge role in driving down insurance costs.

“And I foresee a significant decrease in premiums, not just one to two per cent. In time, by more accurately assessing risk and pricing insurance, we can make it more affordable and bring access to more underserved businesses and consumers.”

FICO, the analytics software company, has published its ‘FICO UK Credit Card Market Report for September 2023’ revealing that credit card spend is up from last year, with cash sales diminishing 5.8 per cent in the same time frame.

The research comes from client reports generated by the FICO TRIAD customer management solution. It found that in September 2023, credit card spend was, on average, £805; £30 more than in September 2022 and almost £100 (£95) more than in September 2021.

Commenting on the findings FICO said: “Following a yo-yo summer of consumer spending and credit card management, September 2023 saw the average spend on credit cards fall slightly, albeit it remains higher than the previous year. With the festive season approaching and advertisers ramping up their spending push, it’s likely spending will rise in November and December, although the question will be how much, given the other well-documented financial pressures consumers are facing.”

Caution needed

In the past two years, December’s credit card spend has been £50 more than September’s figures. If this year and next year follow the same trend, consumers could be spending around £900 using credit cards in December 2024 on average.

However, lenders should be wary. There has been year-on-year growth of 9.3 per cent, 10.7 per cent and 17.9 per cent in the percentage of accounts missing one, two and three payments respectively. When looking at singular payments missed, September 2023 was a stark increase compared to August of the same year as there was a 13.5 per cent increase in missed payments.

FICO added: “For those customers missing two payments, the average balance has marginally decreased by 0.6% month-on-month at £2,605, but this has been trending upwards over the last few months.”

Rising card balances

The analytics software company also said: “Driven by the increase in spending, there has been a slight monthly increase in average credit card balances. There has also been an increase in the number of customers missing payments, illustrating that the ongoing economic volatility continues to impact consumer spending. Inflationary pressures and a weak economic outlook mean average balances are likely to continue an upward trend, remaining higher than last year for some months to come.”

In fact, the average credit card balance remained relatively stable compared to August, at £1,735, but continued the longer-term upward trend with a year-on-year increase of 8.6 per cent.

In May 2022, the percentage of payments to balance peaked at 42 per cent. Since then, there has been a downward trend and it currently stands at 38 per cent. This follows up-and-down movements since a two-year low in April 2023.

Return of cash?

The research also revealed that more and more cash has been used since March 2023. This upward trend continued in September as there was a 1.6 per cent month-on-month increase and a 4.3 per cent increase year-on-year. However, despite a rising proportion of cash sales to total sales in September 2023, when compared to the month prior, looking at the larger picture, the total number of cash sales to total sales has dropped 5.8 per cent since September 2022.

This October at The Fintech Times is all about shining a spotlight on the incredible women working in the fintech industry, sharing their greatest achievements, their biggest challenges and how they can make a difference fostering women’s careers.

Though progress has been made to reduce the gender gap in fintech, the industry still has far to go until it hits true representation and champions full equality.

To help highlight the influential and significant contributions of women to the industry, we asked influential fintech leaders (who just so happen to be women) to share their thoughts on how the gender diversity in the industry has evolved since they first started their careers.

A stark difference

Ava Kelly, chief product officer at payments processing company Thredd, said:

“It’s constantly changing, as I’m sure everyone agrees. The financial services industry twenty-five years ago when I was starting out, is starkly different to what it looks like today, which is terrific. I believe that is driven by the constant drum of innovation that is driving new ways to deliver payments, banking, and money movement. There is also a much more diverse ecosystem of players interacting on a global scale. These shifts have created a whole new set of roles and ways of working for men and women. I certainly see women across a much more diverse set of roles and at more senior levels than in the past whether that is as an engineer, managing client onboarding teams, leading sales or product organisations, heading up corporate partnerships or being the founder and building their vision from the ground up. The list goes on and on.

“I know many female leaders in payments that are real change-makers, trailblazing the way for the female
leaders of tomorrow. Is there room to grow? Absolutely. I don’t know how many female chief product officers  there are in tech and financial services, but I imagine the percentage is on the low side. I love my role as chief product officer at Thredd. I have the opportunity to work with both the front and back of the house to bring solutions to market. It is a great part of the business to be in. I would definitely encourage anyone to pursue this type of role.”

Industry growth

Louise Lunn, vice president, global analytics delivery, at analytics company FICO, said: 

“The fintech industry has grown significantly over the past few years, leveraging advancements in technology, and changing consumer preferences. I joined the industry over 25 years ago as a graduate.

“The industry growth has opened various opportunities for professionals interested in pursuing a career in fintech. Like many other sectors, the industry has faced challenges related to diversity and inclusion.

“However, there has been a positive shift in recent years with more awareness and efforts to promote diversity in the sector. Many fintech companies now recognise the importance of having diverse teams that reflect the demographics of their users and customers. This increased focus on diversity and inclusion has led to initiatives and programs aimed at attracting and retaining diverse talent in fintech.

“To navigate a career in fintech, it’s essential to be proactive in seeking out companies that prioritise these values and leverage networks and resources that support diverse professionals in the field.”

A culture of inclusivity

Sylvia To, manager of crypto exchange, Bullish, said:

“When I initially embarked on my career in this industry, the environment was markedly different. The conversation surrounding diversity and inclusion was not as pronounced or prioritised as it is today, and often I would find myself among a limited number of women in professional spaces. A tangible metric to observe this shift over time is the gender composition of industry panels. Compared to earlier years, we are now witnessing a notable increase in the representation of women on such panels, which is a meaningful stride towards fostering a culture of inclusivity.

“Just recently, I had the opportunity to participate on a panel where the gender distribution was evenly balanced. This was a significant moment not only for me but also for my fellow panellists, as it underscored the industry’s evolving commitment to ensuring diverse voices are heard and valued.

“I do believe over time organisations have started to prioritise diversity and inclusion, implementing policies and initiatives to ensure a more equitable workplace. There’s an increasing recognition of the value diverse teams bring to innovation and problem solving.

“In my view, starting a career in fintech may be somewhat easier now than when I first started. There are more resources available, from mentorship programs to networking groups specifically for women and underrepresented groups in fintech. Additionally, there’s a growing awareness of the importance of diversity in the industry, which open more doors and opportunities.”

Path to success

Andrea Berry, head of business development in Theta Labs, one of web3 largest decentralized video streaming projects, said:

“Looking back at the start of my career, it’s interesting to see how much I normalised the challenges I faced as a woman simply because I didn’t have any other working experience. I worked in the NBA, explicitly interviewing in the locker rooms for the first four years of my career. I became very resilient to the challenges women face as professionals. I didn’t realise it then, but in the last several years, it has become apparent, and I try to focus that resilience on the mentorship of younger women in my network. If I can share what I learned, what I experienced, and the strategy for navigating through these challenges, I know that it will not only help those people but my time and effort will be an example for them to follow as they grow in their careers. Many challenges lose power and control when people can come together and learn from each other.

“What I appreciate about the web3 space is its commitment to inclusivity. Unlike traditional technology or finance industries, where established institutions often define the path to success, web3 embraces a decentralized ethos that offers opportunities regardless of background and identity. This aspect of web3 technology is promising. It welcomes individuals from diverse backgrounds and actively encourages their participation.”

Greater challenges

Suki Gao is co-founder and China GM of 40Seas, a fintech platform that digitises and simplifies cross-border trade financing for SMEs, said:

“Over the past decade, the international cross-border financial industry has undergone significant changes. From the perspective of professionals in the field, in the past, most people primarily had backgrounds in finance and accounting. However, today, the industry has become more inclusive and values the diverse experiences of practitioners in various other domains, such as e-commerce, traditional trade, gaming, and more.

“For me personally, I have noticed that this industry presents greater challenges compared to when I first entered it. This is because customer expectations for fintech services continue to evolve in terms of diversity and practicality. Additionally, competition from peers in the industry is intensifying. Therefore, the key to staying relevant is to continuously learn and innovate within the market to avoid obsolescence.”

The average credit card balance has once again increased in July (£1,710) and August (£1,729), reflecting the upward trend seen in the last two years reveals FICO, the analytics company, in its latest report.

The FICO UK Credit Card Market Report for July/August 2023 paints a picture of erratic consumer financial management which could challenge how lenders look after vulnerable customers in the winter months.

Average spend on credit cards over the summer has been relatively flat, albeit still at the highest point since FICO records started in 2006. The average balance has also continued to increase month on month. Both of these factors reflect the general inflationary pressures across the UK economy.

The FICO analysis also illustrates the delicate balancing act cardholders are managing, with the percentage of payments to balance yo-yoing over the last few months following a significant drop in the spring. This can be expected to continue whilst households struggle with the combined burden of higher prices and higher credit card balances.

In fact, the average spend levelled out over the summer months to £825 in July and £830 in August. Nonetheless, they remained significantly higher than the same period in 2022 (£790 and £810, respectively).

The issue of missed payments

The percentage of customers missing one, two and three payments is also significantly higher than the same period in 2022, reflecting the challenges faced by those without a savings cushion to fall back on. Specifically, customers missing two payments was 11.9 per cent higher and for those missing three payments a worrying 20.3 per cent higher.

The initial increase in missed payments began during the Christmas 2022 period and has trended upwards across one, two and three missed payments since. In particular, the average missed payment balance has been increasing since May 2023 for those customers missing one payment and since March 2023 for those with two missed payments.

The erratic pattern of payments continued in August with the number of customers missing one payment down 6.3 per cent after an increase of 5.8 per cent in July. However, the increase seen in July has rolled through to August for those customers now missing two payments.

The other warning flag for lenders is the use of credit cards for cash withdrawals. Recent reports from UK Finance stated that consumers paying for items in cash had risen for the first time in a decade. This increase in cash usage is reflected in the FICO benchmarking figures.

These have shown a steady increase since March 2023 in the percentage of customers using their credit cards to take out cash. In July this was 3.6 per cent and in August, four per cent. However, this is still significantly lower than before COVID, when over six per cent of customers used credit cards to take out cash.

The new data provides important insights for lenders as they prepare for the next wave of winter fuel costs hitting customers’ disposable income.