This time last year, we were looking at a hockey stick expansion of Insurtechs. It seemed that there was almost unlimited growth with new start-ups. However, over the last few months, there seems to be a different theme.
Is this the beginning of an end or an end of the beginning?
Hitting a high mark
Mark Breading, Partner at SMA, has followed the InsurTech phenomenon from the beginning and is one of few who takes a balanced look at the present and future. Writing in PropertyCasualth360 from the October InsureTechConnect2017 conference, Breading noted the success to date and the potential for the future.
In the early days of 2015, SMA began tracking InsurTech start-ups. There were 50 that could be located. Two and a half years later, there were 1,200 worldwide. Breading noted: “There have been failures along the way, but there is still an upward trend in the number of startups.”
And there are results …
Venture capitalists, insurers, insurance technology providers, and independent investors came to the table to finance the InsurTechs and to provide additional advice and support (innovations hubs, accelerators, etc.)
Overall, Breading is sanguine about the progress: “Many InsurTechs and their insurer partners are on the verge of rollouts and implementations that will produce more substantial results. We are likely to see some insurtechs emerge as big winners.”
But insurance winds can be disrupting
There is one characteristic of InsurTechs that I find potentially problematic. When I hear startups say:
“I don’t know anything about insurance…” (no problem yet). “But I know our technology will work.” (big problem)
This is not new to the InsurTech phenomenon. I came into the insurance industry from a different discipline. And I assumed my technology knowledge was sufficient.
That was a bad assumption. ‘Nuff said.
Let’s consider legacy systems …
Robert Regis Hyle posted on ‘The Spiraling of Insurtech’ in December’s ITA Pro Magazine. He focussed on VC investors, ManchesterStoryGroup, and its co-founder and managing partner, David Miles.
Miles notes that “the major technology focus among insurance carriers has involved replacement of legacy systems.” And the insurers are looking to leverage the investment by looking for InsurTechs to expand functionality.
“We have not seen a lot of insurtechs looking to replace core systems, so it’s different in that respect, but at a minimum they still need to link into these core systems,” says Miles.
Convergence and rationalization
Breading says that InsurTechs will take a large role in insurance transformation as they align themselves with insurers’ specific interests. He suggests this will a predominant trend for the next few years.
But not all InsurTechs will understand that trend. Breading notes that , “We will enter a phase in the next 1-2 years when more startups close their doors, are acquired, or otherwise exit as standalone firms.”
The end game, according to Breading, is a “new face of the insurance industry”.
What do you think?
If you are an InsurTech or are working in an insurer / broker / tech supplier role, we’d be interested in your thoughts.
A great place to pose questions and discuss is at the 2018 Insurance-Canada Technology Conference 27-28 February. Mark Breading is one of th really smart faculty that we have put together.
Can’t make it, but want the information? We will be creating video of the event. Interested? Drop a note to me (Patrick.Vice@Insurance-Canada.ca), and I will send details.