At its beginning, the Fintech industry’s vision was to fundamentally transform traditional banking using advanced technologies. A decade later, this vision has yet to fully materialize. Despite the acceleration we’ve seen in tech-based financial solutions, it is generally agreed that financial institutions are not likely to disappear anytime soon.
As active Fintech investors who review hundreds of Fintech solutions annually, understanding the processes and challenges the industry faces constitutes a critical element when we consider investment in a potentially disruptive solution.
The following are specific challenges and shifting paradigms in the insurance industry – a traditional sector in which we believe there is opportunity to create large-scale companies and disruptive value.
One of the pain points which constitutes a catalyst for innovation in the industry is the “loss ratio”: the difference between proceeds from insurance activity, and payment of claims. Among most insurers, this ratio is negative, with insurance fraud being a main cause. Insurance companies struggle to identify fraud for several reasons:
First, information is kept by the insurer within different departments and systems, with very limited communication and sharing among them. This makes it difficult to create a holistic picture of clients.
Second, most of the information is stored analogically, in simple digital formats – and most is unstructured. This forces insurers to allocate a large workforce to manually review and analyze claim documents, with no ability to perform comprehensive comparisons or historical analyses.
Finally, and perhaps most perplexingly, external data sources are rarely utilized. Therefore, basic information such as public criminal records which may indicate a client with a history of fraud is not analyzed. This alone would be a glaring omission in fraud investigation, without even considering the lack of scrutiny of more complicated and unique external sources.
These problems were at the center of JVP’s investment philosophy when deciding to invest in Getmeins. Getmeins is a startup which developed a holistic solution for the detection of insurance fraud. The platform first renders the aggregated information in the insurance company’s systems fully accessible and ready to analyze. It then creates a comprehensive view of the policies and the insured person’s status based upon all information stored within the insurer’s various systems, and enriches it using multiple external data sources. In considering the various methods of fraud and insurance products, the platform’s robust AI engines learn to recognize potential fraud as early as the onboarding phase.
We believe there is still plenty of room and demand for Fintech innovation, however, given the technological “arms race” of the global Fintech industry, the level of innovation required to succeed has significantly increased. We at JVP are constantly on the lookout for such disruptive technologies which have the potential to change the industry.