A David vs. Goliath-type match is playing out today as traditional insurance providers face a growing number of emerging technology startups that fall under the “InsurTech” trade name. These businesses employ inventive digital technologies aimed at changing the current insurance industry model.
Most commentaries view this as a battle. But does it really need to be?
Given the challenges facing all insurers as marketplace disruptions persist, opportunities exist for insurance companies and InsurTech firms to work together. For traditional insurers (notoriously slow to change), InsurTechs can help deploy innovative products more quickly.
In brief, many incumbents have been missing, and continue to miss, the tech component.
Insurers are teaming up with InsurTech firms in the following principal areas:
Digital claims management;
Blockchain-based digital distribution that includes cloud services;
Customer engagement; and
Connected insurance that links Internet of Things initiatives with telematics.
For InsurTechs, large insurers are afforded the opportunity to scale quickly. They also can better showcase to traditional insurers how they differ from the typical tech companies that generate a lot of attention. Pairing tech-related insurance startups that possess distinct health, auto, cyber or life ideas for advancements with the insurance industry can add potentially disruptive, but essential, changes for the new insurance consumer to consider.
Collaborations already have begun.
In the 2018 first quarter, InsurTech investments reached a new high of $724 million with 66 deals, according to Willis Towers Watson. It also found that established re/insurers are committing financing with venture capital firms, although the insurers prefer making minority investments in InsurTech startups directly.
In a related report in early October 2018 by World InsurTech, nearly 96% of insurers said they seek to collaborate with InsurTech firms, with over three-fourths saying that “partnering to develop a new solution” was their preferred approach.
Industry insurance executives believe tech-related insurance firms will serve as major catalysts for “redefining the customer experience, deliver widespread efficiencies and create new business models.”
Along with collaborations, insurers are launching digital innovation laboratories, internal innovation programs and increasing M&A activity. For example, Munich Re said at its 2017 Investor Day that they had partnered with over 30 technology companies through its Digital Partners program, which was launched in 2016. This year alone, Munich Re has invested over $150 million into U.S. insurtech startups and announced a partnership with Plug and Play to expand insurtech partnerships in China. American Family Insurance has partnered with TrueMotion, a company which provides turnkey, smartphone usage-based insurance technology, and made it a part of its new app-based driver safety program. Atlas Financial Holdings, a passenger fleet insurer, is collaborating with Nauto to deploy its dual-facing cameras, telematics and data platform across multiple fleets of Atlas’s taxi, livery and paratransit customers.
Partnerships are increasing abroad as well. Medici, a global independent newswire and information source for financial technology, recently analyzed 95 partnerships were established between European insurers with InsurTech startups.
Within the insurance industry, competition, of course, has never been tougher. It’s also never been a more exciting time to be an insurer. InsurTech possesses the potential to transform one of the oldest, most regulated — and slowest to change — industries into one of the most inventive and technologically advanced. Together, incumbent insurers and InsurTechs can create fresh customer experiences and build a more sustainable future.
When we help each other, everyone wins… especially the customer.