When do we stop talking about InsurTech and instead just refer to these new entrants as part of the insurance sector? The answer is probably not yet. But the time is rapidly approaching when we should stop talking about InsurTechs as outsiders and instead recognise that these innovative businesses are part of the day to day business of protecting assets. In the same way ‘digital’ is no longer considered a separate element of a business (digital touches everything a business does), InsurTech solutions are becoming business as usual for the insurance industry.
InsurTechs become business as usual
The benefits brought by InsurTechs (the ability to do new things in new ways) explains why so many incumbent insurers are now partnering with startups across the breadth of the value chain. In 2016 28% of insurers were partnering in this way and in 2017 that number has grown rapidly to 45%. I expect to see that number rise further still next year as InsurTech becomes part of business as usual for the insurance industry.
Many challenges remain. Can the startups scale? Will more traditional suppliers adapt and drive many of these new entrants out of the market? And can insurers work effectively with small, dynamic, often inexperienced businesses? Currently only 17% of insurers believe they work effectively with InsurTechs. It takes a different culture and different processes to make a success of partnerships but I believe the prize for all concerned is substantial enough make it work.
End to end or specific elements?
This assumes, of course, that the disruption caused by new entrants doesn’t throw the established market into the air and directly challenge incumbent insurance companies. Although we are seeing a few notable entrants aiming to be end-to-end insurers gaining traction, the majority of startups are targeting specific areas of the insurance value chain. Their business models are dependent on working in partnership with incumbents. I don’t predict the end of the established insurance market just yet!
InsurTech business models often focus on a new opportunity for insurance (maybe bespoke risk selection) or resolving a known problem (such as effective data governance and analysis). InsurTechs offer incumbent insurers options when they are looking to develop their business. As a consultant, I am increasingly introducing new entrants to my insurance clients alongside more established and traditional solutions. They often offer a quicker, more flexible and much cheaper option. That said, InsurTechs still have some way to go to match the benefits of working with the big guns such as experience, overcoming IT and data security issues and a track record of delivery.
Flex, adapt and embrace
Insurers do currently innovate and one of their biggest innovations is looking outside their own business for new ideas and solutions. They will need to flex and adapt but they have already started on this journey and it won’t be long before the success of InsurTech means we stop talking about InsurTech and focus back on insurance.
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