Major Points On How Can Insurers And Insurtechs Successfully Work Together
Insurtechs have burst onto the scene in the last few years. All well and good, but what exactly does this mean for the insurance industry today and how best can insurers work with insurtechs?
Here are some of the key trends we are seeing about the current and evolving state of play:
The Key to Successful Insurtechs is Scale
The boom in insurtechs started three years ago. The popular image is of the insurtechs who are out to disrupt the established insurance market with digital products that cut out traditional insurers and brokers.
Certainly, disruption was the insurtech mantra at first, but the reality is dawning that scaling up insurtechs to compete for customers is tremendously difficult. Regardless of how digital business is, there are legal and regulatory hurdles that are hard to overcome.
Several disruptive insurtechs will survive (though it is telling how some of these challengers, independent digital insurers are hiring traditional insurance industry veterans to lead their operations).
What the majority of insurtechs are focusing on is how they can make themselves attractive to established insurance businesses who have done the hard work on customer acquisition, statutory capital, and regulatory compliance, and are in the market for innovation. To do this, insurtechs are looking at how they can fit into different parts of the insurance product lifecycle, such as making existing processes like risk analysis or claims assessments more efficient or evolving existing products like a motor with vehicle telematics or property with IoT. Some are inventing new insurance products that may be positioned as disruptive (for example, pay as you go motor insurance or insurance for the gig economy), but the reality tends to be that these insurtechs either have, or are, seeking backing from an established business that is typically a traditional (re-)insurer.
Jump on a Software Platform
As insurtechs need to connect with insurers, the importance of common software platforms has increased. These offer the best way for insurtechs to interconnect with insurers.
For insurers who want to consume new insurtechs’ innovations, the extent to which insurtechs can operate on the same platform irons out a significant obstacle to new technology adoption and avoids the need to train insurance staff on an unfamiliar dashboard.
Evolving Strategies for Insurtech Engagement
Insurers have clearly not ignored the insurtech movement. All of the top insurers globally have innovation units or venture units that are talking to, working with, and even buying up insurtechs. Medium-sized insurers are also employing scouts to check out insurtech potential and capability.
It is worth noting that there are some regional differences, and the extent to which insurers are engaging with insurtechs is mixed. International carriers have innovation labs and insurtech investments, but domestic insurers are more hesitant, are less likely to have labs, and more likely to observe, rather than work actively with, insurtechs.