- Where Insurance & Technology Meet

InsurTech Futures

InsurTech is a hot topic in the insurance community. Developers are bringing forward digital technologies, which improve existing functionality, increase customer experience, support new products, and reduce friction costs.

The big question is whether InsurTech will continue to operate on the periphery of ‘standard’ insurance technology or integrate with insurers’ architecture.

InsurTechs are taking positions….

If we look solely at the spending trends, InsurTech funding has gone from nowhere to serious interest in 6 years. Writing in Brinks News, Deitmar Kottmann, Partner, Digital Strategy Practice at Oliver Wyman and Nikolai Dordrechter, Managing Director of Policen Direct-Group cited CBInsights: “total deal activity has increased sevenfold over the past decade, averaging $1.7 billion a year from 2014 to 2016, compared to $250 million a year, from 2011 to 2013”.

But spending is just one component. We are seeing new organizations that are relying on InsurTech to run the entire insurance enterprise. Examples include Lemonade, Slice, and MetroMile.

Some would say that these startups are ambitious, but not earth shaking as yet. The exception that lends credence to the rule is Zhong An, China’s first on-line only insurance company which is valued at US$8 billion . More on that below.

Does this portend a technology transformation?

Kottman and Dordrechter gathered information on the use of InsurTech: “19 types of InsurTech business models within three industry value chain segments and compiled a database of more than a thousand InsurTechs” (Note: ‘InsurTechs’ are organizations specializing in InsurTech).

The initial analysis is¬†encouraging. The authors found that “many startup investors having a history in funding successful e-commerce models and wanting to replicate this success in a new domain, namely insurance.”

However, there are some challenges. ¬†The authors say that the existing models assume customers will seek insurance. Unfortunately, this ”pull model” applies to “only a few areas of insurance, where the need for coverage is so great that customers actively seek out and purchase it.”

The authors note that InsurTechs need to have more “insurance-savvy” and suggest that Zhong An is adopting models which will provide leadership in moving to the “second-wave”.

Sounds promising, but …

Start ups – including large enterprises such as Zhong An – come to the table without pre-conceived technology notions. When we look at established organizations, however, we cannot assume that insurers will follow the digital leaders.

Maria Terekhova, from Business Insider, cites a recent study from StartupBootCamp and PwC, and notes that InsurTechs are moving to internal functions – such as underwriting – and are leveraging Artificial Intelligence (AI) to support complex insurance functionality.

That’s promising, especially with opportunities to address new risks and to use more flexible tools.

However, there is a big barrier. According to a survey of ‘incumbents’ (insurers), only 17% “think they’re good at collaborating with insurtechs.”

On the other side of the divide, the researchers found “that many startups find such partnerships to be ‘frustrating and slow.'”

What are Insurers worried about?

The Startupbootcamp and PwC study found that the top five concerns by insurers were:

  • IT security
  • Difference in business models
  • Regulatory uncertainty
  • Differences in management & culture
  • IT Compatibility

With the exception of the second item (Difference in business models), the list is no surprise. In spite of the fact that insurance is a risk taking business, with a few exceptions, many insurers look to ‘tried and true’ technology solutions.

InsurTechs – especially those that have worked in other business sectors – haven’t figured that out yet.

But change is in the air ….

The leading insurers and technology suppliers are actively seeking to help InsurTechs understand insurance and integrate the InsurTechs into the insurers’ technology environment.

Working in incubators and accelerators, insurers and ‘established’ suppliers help new developers understand the nuances of insurance products and processes.

And organizations – such as, Inc. – are showcasing opportunities and successes stories through our website, blog, and events.

Our next event – The 2017 Insurance-Canada Executive Forum (#ICEF2017) 29 August 17 – is titledInsurance: Connected” and will feature Canadian and international experts in InsurTech sharing information and opportunities.

Where are you in the transition?

We’d be interested in your thoughts and experiences with InsurTech. Please leave us a note. Or, better still, let’s have a conversation at #ICEF2017!

One Comment


InsurTech is definitely something, and Patrick did a good job explaining complex things in a simpler way. Job well done, bookmarking this article!

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