Article Synopsis :
Insurtech startups are not considered the threat they once were. The past three years have seen them evolve from disruptor to enabler, to partner. And increased partnership is helping insurers overhaul their processes and systems across the value chain.
It is sensible for insurers to look outside their own sphere to find new and innovative technology to incorporate within their businesses.
Cultivating relationships with startups has become part of many insurers’ business strategy as it proves to be a quicker and more effective means of resolving the problems they face.
The potential for collaboration to deliver meaningful transformation is huge. However, insurers must not focus on short term gain such as cutting costs and boosting sales above long term projects that will re-engineer their business for the new world order. Those who fail to adopt insurtech will be most likely to be disrupted.
Startupbootcamp’s Hartford Insurtech Hub evaluated over 3000 show tech businesses and over 235 applicants from across the globe. The vast majority of startups are in North America 43.83% followed by Asia including India at 20%. Europe comes in third at 14.47%.
Small, but perfectly formed
The majority of these are at the prototype stage, with 46% being funded by friends and family or angel investors, while 42% are seed funded.
Founders of insurtech startups are beginning to team up, with 74% of the 235 applicants founded by two or more partners. More than half have an advanced stage concept of use, which suggests they are already collaborating with insurers and are aware of what they require.
Three quarters (75%) report have revenue generating models, with 66% using software as a service (SaaS). In almost half (48%), it is via direct sales, with 36% using a licensing model.
In 44% of cases, the founders have experience of building companies up before.
There are five key areas where startups are partnering with insurers:
1) Innovating for value beyond insurance
In the future, insurers are likely to focus on their core capabilities and won’t necessarily look to be owning the rest of the value chain, and so, therefore, not have a focus on distribution or administration.
2) Improve data management and predictive analytics to enhance insurer decision-making capabilities
Many of these startups offer new ways to analyse and leverage big data and may even offer access to new data sources. Being able to analyse this huge field of data can improve decision making and optimise processes ultimately limiting or mitigating risk. However, legacy systems can’t cope with it, whereas the predictive analytic take data management skills that the startups have allowed insurers to make use of this data now.
3) New insurance ecosystems and networks through tech partnerships
Insurers are facing competition from the likes of Amazon and Google. But while these businesses are acquiring and funding startups, they are looking to partner with large established insurance brands. There are many barriers to entry, but regulatory oversight gives perhaps the greatest concern to the tech giants.
For their part, insurers may give up control of their value chain, but they get access to both more potential customers, plus behavioural data that will allow them to improve their own offering.
4) Connectivity through the internet of things
The internet of things (IoT) has rapidly moved from a concept to a live model developing a new distribution channel, gathering data and tailoring new products for customers.
Blockchain will begin to find a home as insurers seek to streamline their processes and deal with the vast amount of data, managing risk and preventing fraud. Increased trust between insurer and customer will also increase loyalty.
5) Process optimisation and automation to improve productivity
Insurtechs are helping insurers improve their productivity and optimise their processes. Reduced administration and error checking allows for more time spent on improving customer engagement and generating revenue.
They’re stronger together
The authors anticipate that funding of startups will continue as these relationships strengthen. Only those who choose not to engage are going to be left behind and most susceptible to disruption from large tech companies.
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Digital Insurer's CommentsSome interesting insights into the structure and development of the startup market.
The fact that collaboration is happening is good, but incumbent insurers must begin their journey into digital transformation or be left behind and picked off by the disruptors.
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