An insurance technology company before it was cool

Last year was another record year for funding commitments to insurtechs, with investors' hunger for the sector showing no let up and valuations continuing to climb. In contrast, eReinsure was launched in 1999 amid a different craze: the dot-com era.

Best-Devereux noted that now, as then, winners and losers are starting to emerge. "It makes sense that we are now entering a phase of the cycle where success starts to be measurable," he said. "Just as with the dot-com bubble, I'm sure we are going to see the return on many of these investments has been poor. But there will be survivors that add significant value, just as eReinsure was one of the few survivors of the B2B frenzy of the late 1990s. You have to have a real value proposition and you have to be tenacious. It's not just about how much money you raise and how much noise you make."

Is a mature web-based platform an insurtech?

Insurtech is a buzzword that has only come into fashion in recent years. Best-Devereux pushes back at any suggestion that a mature web-based platform such as eReinsure is not an insurtech, however.

"That is a limiting viewpoint," he said. "Experience and the maturity of a business really matter, especially with technology platforms. It also takes a long time to build out a network of business relationships. Network effect is very important. Platform dynamics matter, by which I mean you need a business model, business network, technology and governance around rules and roles. An engagement platform like eReinsure, that networks together buyers and sellers, adds value precisely because it has sufficient market participants on the platform."

He added that the eReinsure platform continuously updates its technology stack, delivering new capabilities to its business network. "The great benefit of 20 years of experience is that we know where to focus our efforts based on real customer experiences and feedback," he said. Further, Best-Devereux suggested that many of the new companies are not true insurtechs. It is rare for any insurance-related company to be launched now that is not labeled an insurtech.

"It's a catchall phrase that's being used," Best-Devereux said. "I sometimes view it as more driven by the investment community wanting to brand part of their activity, irrespective of whether an investment is truly moving technology into the core of the insurance market."

He continued: "Frankly, a lot of insurtechs aren't technology companies at all. Several new MGAs say they are technology companies but are really just niche underwriters. Of course, companies in other markets look for a technology premium to their valuations too, classic cases in point are WeWork or Uber."

Technology's value: efficiency across the value chain

Best-Devereux believes the key value of technology in insurance is increasing efficiency across the entire value chain. "We're at a critical point in time for the insurance market, technology offers huge opportunities for cost saving and efficiency," he added. The executive continued that eReinsure has focused on technologies for distribution because this is where it can have the greatest impact in supporting the market.

"Insurance or reinsurance is fairly straightforward: risk needs to be distributed to capital," he said. "The cost of that process comes from many activities and players, and the challenge is to make that overall system more efficient. We're seeing some hardening in the market after a long period of low rates. Hopefully this won't disrupt the realization that cost really matters to the sustainability of the (re)insurance marketplace."

Platform activity in 2019

Reinsurance pricing was generally up at the 1.1 renewals. Discussing placement on the eReinsure platform, Best-Devereux reports there was some more consistent buying of fac overall through the course of 2019. "This especially reflected increased buying at 4/1 and 10/1," he said. Seven out of the top ten cedants using the eReinsure platform increased their buying, which Best-Devereux commented may reflect a continuation of the de-risking many carriers have been pursuing.

In terms of the number of bound transactions, the split between direct and brokered business moved slightly to be two-thirds direct markets and one-third brokered, but the split by premium continues to be approximately 50/50.

"We saw significant growth in our automatics offering, automatically rated and bound business," Best-Devereux said, adding that this emphasizes the movement to automation for some product lines.

Two decades in the business

Reflecting on eReinsure's two decades in the business, Best-Devereux is pleased how deeply ingrained the platform is in the process in the area of its clients' business that it operates in. But he noted that the degree of automation versus human touch varies across types of business.

"When we started eReinsure, many brokers told us that reinsurance is a people business. We agree wholeheartedly, and those people are now supported by technology and can be much more productive than in the past," he said.

Many of eReinsure's customers started out with the need to get outwards fac reinsurance buying under control. "As the technology platform has been applied beyond the process of managing fac it is now heavily used by brokers in placing business across hundreds of markets," Best-Devereux said. "The eReinsure technology, whether in our branded platform or its white labelled form, is accessible by about 40,000 users globally."

Data quality and the role of AI

A major stumbling block to distribution efficiency remains data quality. Best-Devereux said a lot of investment has been made in downstream tools without tackling this fundamental issue.

"Much more should have been achieved by now in standardizing risk data and collecting and validating data in a consistent manner," Best-Devereux said. "Every time a broker drafts an email or fills out a paper form they should stop and think, 'Is there a better way?' This isn't easy but needs to be more ingrained in the market's DNA. Each step forward in data quality increases the value that can come from technologies such as machine learning and AI. These evolving tools will have significant impact on the business of risk transfer."