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Bitesize Impact 25: Digital Fineprint

Digital Fineprint (DFP) is exploring how new forms of data (e.g. social and open) can be used across the insurance value chain. Following the high-profile data issues of recent months, CEO Erik Abrahamsson tells us that the focus has now shifted from personal lines life and GI to commercial (SME).

The company recently added Zurich subsidiary Tennyson to its client list, having already worked with Allianz and launched pilots with Hiscox and QBE.

Pilots are quantifying potential benefits. For example, one pilot cut customer acquisition costs by up to 80% by using ‘next generation’ digital channels such as LinkedIn compared to traditional digital marketing; another increased lead generation by up to seven times.

The company is currently rolling out a new proprietary Business Search tool, which uses 30 different data sets and machine learning software to help insurers and brokers target customers better.

The majority of DFP’s time is dedicated to helping incumbents with distribution, cross-selling, retention, and finding insurance-related insights on SMEs. However, Erik is excited by the way the DFP technology could be used in pricing (a use case being pursued by Impact 25 Members Cytora and Carpe Data).

After delivering revenue growth of 745% in 2016-17 (as reported in the Oxbow Partners InsurTech Impact 25), Q1 2018 revenue already exceeded FY2017. To service this demand, headcount will grow from 15 to 20 this year, with the new roles split across technology, sales and marketing.

The company raised $2.7m in a Series A round in early 2018. The round was led by Pentech ventures, whose portfolio includes the personal finance unicorn, Nutmeg. Other industry stalwart backers include former AXA UK and Towergate CEO Andy Homer and ex-Ageas CEO, Barry Smith.

THE OXBOW PARTNERS VIEW

The UK SME market – now DFP’s stomping ground – is an interesting place. Nestled between the mid-market and personal lines, insurers neglected it for decades in their operating models and even now continue to struggle to know how best to handle it.

We anticipate an intensification of competition in SME in the next 3-5 years. Corporate insurers are trying to build out their (often sub-scale) SME portfolios to counterbalance challenging and volatile specialty market conditions; personal lines players are trying to diversify away from existentially challenged motor-led business models.

This raises the question how insurers can create competitive advantage and grow sustainably in SME. One answer must be to harness data better across the value chain and especially in direct or B2B2C channels. The challenge is to set up an innovation function that can work effectively with companies like DFP and determine exactly how to achieve this data advantage at scale.

We also see big opportunities in the broker channel. Regional brokers still control the vast majority of non-micro SME business and our research does not suggest that there is going to be a rapid channel shift soon. Evidence includes Simply Business’s steady but not explosive historic growth in micro SME; the (perceived or real) complexity of insurance leading to tradesmen feeling comfortable buying through a broker; and low average premiums for many products leading to relatively low channel switching advantages. Many brokers are keen to update their propositions to protect their businesses for the medium term but often lack the resource or expertise to build innovative tech propositions themselves. DFP could play an important role here, working either directly with brokers or in a tripartite relationship with an insurer and their preferred brokers.

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Chris Sandilands

Partner at Oxbow Partners
Chris Sandilands, ACII is a Partner at Oxbow Partners. Chris advises (re)insurers and brokers on a range of strategy topics and M&A. Chris started his career as a D&O underwriter at Munich Re, before joining Oliver Wyman, the consulting firm. You can reach him at csandilands@oxbowpartners.com.

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