In the last two posts, I focused on whether incumbent insurers can employ InsurTech; I suggested that insurers can, assuming that the insurer is ready to make changes. Today, I’m posing the question: How can insurers effectively bring in InsurTech? Hint: As with insurance, time is of the essence.
InsurTech on a role
InsurTech – defined as the use of technology innovations which are designed to squeeze out savings and efficiency from the current insurance industry model – has been on a exponential growth model.
Noting that “The 10 largest insurance tech financing deals in the first nine months [of 2016] totaled just over $955M,” CB Insights commented that, “From the rise of insurers starting strategic venture arms to a record amount of early-stage deal activity to new partnerships in smart home, distribution, and elsewhere, it’s been a busy nine months in the world of insurance tech.”
At the same time …
Many insurers have been taking a wait-and-see approach. In a recent post on the Celent blog, “You Must Be Present To Win,” Mike Fitzgerald, Senior Analyst at Celent, notes that there has been an explosion of events and trade shows focusing on InsurTech in the last year. However, Fitzgerald adds a caveat: “I observed a problem — there were not many insurance leaders attending. Given the need to gain perspectives on how to move the industry forward through the forces that are under way, this is a red flag.”
This is not new, but it is different
I have been involved with insurance technology for over 30 years. With a few exceptions, the vast majority of P&C insurers have lagged other industries in the application of technology. There are lots of reasons and explanations, and the industry has muddled through.
But there are a few key elements that are different with InsurTech. Chief among them is that InsureTech suppliers are not just improving productivity and profitability for incumbents; they are positioning themselves as partners or, in some instances, competitors.
Consider these InsureTech pioneers: Lemonade is out selling renters and home insurance in New York. Trov – which focuses on replacing specific items – is live in Australia and scheduled to come to the US in 2017. Slice is licensed in 50 states to distribute on-demand insurance for Uber drivers. And there are others.
These organizations are bringing offerings that optimize both product and process. As a result, the InsurTech organizations, which are marketing insurance products, will have an advantage in customer experience and engagement as competitors to established insurers.
This could be more than a better mousetrap …
This could be the beginning of a new industry. Mark Breading, Partner at SMA, recently attended the InsurTech Week 2016 hosted by the Global Insurance Accelerator in Des Moines and provided his views on the SMA blog.
Breading is sanguine on the prospects. He found that the InsurTech organizations are doing more than building profitable companies. Along with engaged insurers, the InsurTech organizations are developing “a great atmosphere of collaboration and even a sense that there is a higher purpose.”
Breading expands on this: “Many in the industry are now actively involved in building strategies, experimenting with new ideas and technologies, launching new ventures, and generally being willing to think differently.”
And Breading concludes that InsurTech enterprises are looking to collaborate with insurers: with a positive sum result: “While many industries are being disrupted, insurance is more likely to morph into a better version of itself, with incumbent players learning from and partnering with new players.“
But this requires a new relationship model
I think Mark is on-point, with one caveat. The InsurTech folks are very open to insurers which are open to them – prepared to move at InsurTech time. Wait-and-see need not apply.
This is a partner, not a buyer – supplier, model. The speed at which InsurTech operates does not allow for lengthy traditional procurement, development, and deployment processes.
What do you think.
Do you see InsurTech being a dividing line between the past and present of insurance? If so, do you see your organization changing?
Editor’s Note: #ICTC2017 will feature a number of sessions, led by InsurTech practitioners, which will focus on the changing business models and relationships. Stay tuned for announcements in our newsletter, The Chronicle . Or follow us on Twitter @InsCanada and @PatrickVice.