Insurtech: Enabler or disruptor? An assessment of the Australian insurtech ecosystem

Article Synopsis :

The insurance industry value chain is undergoing profound and rapid change, driven by new customer expectations, emerging technologies and sustained downward pressure on margins.

Insurtech: enabler or disruptor?

The Australian market has been relatively slow off the mark and despite its mature market, represents only 1% of global insurtech.

Here to help, not hinder

This EY and insurtech Australia paper looks at understanding the current Australian market and determine whether insurtech is enabling the future of insurance or disrupting the sector.

They found that

– 65% of insurtech organizations are enablers of the value chain;

– 25% are new entrants and complement the existing value chain;

– 10% are disrupting and challenging the status quo.

In nine out of 10 cases, insurtechs in this market are there to enable incumbents to drive deliver more value through new customer experiences. They are evolving traditional underwriting and pricing models, interpreting large sets of data to inform risk modeling and enhance portfolio performance.

Key findings

The report makes five key findings.

1) More collaboration needed between insurtechs and incumbents

Two-thirds of insurtechs exist to add value to the value chain, yet 81% of insurtechs feel that incumbent players could do more to collaborate. Insurtechs listed collaboration as their #1 goal for the coming year.

2) Both must identify and leverage their strengths in seeking partnerships

Insurtechs and incumbents are very different but have the capabilities to develop a value creation vehicle to address the dynamic challenges in the insurance landscape.

3) Insurtechs at increased solvency risk due to drawn-out sales cycles

81% of insurtechs are bootstrapped by their founders, with 56% having a runway shorter than 12 months. Their top three external issues are related to customer acquisition or channels to market, confirming the need for greater understanding and collaboration between insurtechs and incumbent players.

4) Insurtechs need to be effective people and economic managers to overcome internal challenges

Insurtechs’ top three internal issues are managing capital, attracting qualified and suitable talent, and product and market fit.

Scaling up via access to external capital is a characteristic unique of tech companies and comes with challenges. Many use an advisory board to fill gaps in skills and experience.

Product development is the biggest cost and is the central focus for founders. Good product managers and developers are in high demand at Australian insurtechs.

While insurtechs explore new ways of applying technologies in the value chain, they may not articulate/address the industry’s core challenges.

 5) The Australian ecosystem is young, growing fast and a great launchpad

Most insurtech in Australia are less than three years old. A quarter (24%) have raised more than $2m in  capital while 40% have attracted money from overseas.

83% already operate in New Zealand and/or other overseas markets.

Government funded projects like the Landing Pad Program have helped this global success.

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