August 17, 2017
It wasn’t too long ago that the word disruption entered and permeated the business scene as start-ups such as Uber, Airbnb and Amazon brought large-scale innovation changing the way consumers behave, therefore changing industries altogether.
The world watched as an increasing number of industries were disrupted by savvy, agile technology start-ups looking to change the traditional way of conducting business and ultimately gain market share. Enter Insurtechs, the flurry of start-ups in recent years aimed at entering the insurance space to shake up the ecosystem. The industry was not surprised; but rather than exude fear of disruption, it is focusing on opportunity and collaboration.
The emphasis on collaboration is just one theme conveyed from two leading reports on the Insurtech landscape: a joint report done by PwC and Startupbootcamp and another from Accenture. Further findings are below.
- Start-ups this year are demonstrating broader and more sophisticated value propositions that support the entire insurance value chain vs. an initial focus on distribution.
- Insurers continue to recognize that Insurtech products enable growth by transforming the customer experience/relationship, reducing costs and helping the industry to innovate. This has led to an increase in engagement and collaboration. PwC research shows 28 percent of insurers were forming Insurtech partnerships in 2016. This year, that number is at 45 percent.
- A second wave of Insurtechs are emerging targeting needs that are closely aligned with insurer pain points. There is an increased attention to mid and back office operations rather than customer facing distribution, including a notable fourfold increase in start-ups focusing on new approaches to underwriting and predicting risk.
- There is a great learning curve for collaboration. As Accenture points out, some traditional insurers are 300 years old, while some Insurtechs are just 300 days old. This stark contrast can lead to significant differences in culture, workforce, agility and technology. Both parties need to come to the table with an understanding of potential differences and focus on mutual needs and opportunities.
- Primary Insurtech hubs continue to be U.S. based (Silicon Valley, San Francisco, New York) but the UK, Germany, China and India have significant markets of their own positioned for further growth.
- Technologies for analytics/big data, artificial intelligence/intelligent automation and Internet of Things (IoT)/connected insurance are growing at a rapid pace, with each bucket doubling or tripling since 2014.
- Collaboration and technology-driven innovation are also themes underscored in Business Insurance’s Break Out Awards (June 2017) which honors 40 emerging risk management leaders.
What We’re Reading
A look at 10 leading InsurTech investors by number of deals from 2010-2016 in the VC and private equity space.
As noted above, there is a greater focus on the back office. Business Insider takes a closer look.
InsurTech funding approached $1 billion in Q2 2017. This represents almost a 150 percent jump from Q2 of 2016. The article also highlights the growing trend of focusing on claims technology.