Oxbow Partners – Technology Vision for Insurance 2018
The challenges of engaging effectively with emerging technology led businesses
Spotting the winners is just the start: it’s what happens next that matters. In 2016 we released a short report3 about the challenges insurtechs experienced engaging with insurers. These included: a tendency by insurers to show great interest in an insurtech but be distracted when a short-term revenue opportunity arose; a lack of creativity in the solutions insurers were able and willing to offer insurtechs; and slow decision-making processes.
In 2018, these issues have only partly been resolved. We still see many insurers taking a long time to implement proofs of concept, for example. The innovation team may move at speed, but is quickly slowed down by governance processes such as procurement and data privacy. Pilots regularly take over 6 months to run – a painfully long time for insurtechs. The number of production-level implementations is still low (but ticked up in Q4 2017).
Insurers and brokers need to address these challenges. Only a few have managed to date: Euler Hermes Digital Agency and Digital Partners at Munich Re are two stand-out examples (profiled later in this report). The response requires both clarity of purpose and execution excellence.
Many other companies have set up innovation infrastructure – ‘labs’, ‘studios’, corporate venture capital arms and so on. However, most have not had the impact that Euler Hermes and Munich Re have achieved. As we describe in section 3, successfully engaging with insurtechs involves both cultural change and ‘startup grade infrastructure’.
The consequences of not engaging
Some industry executives might argue that engaging with insurtech is optional, pure hype. We agree on a semantic level, which is why the title of this report refers to ‘emerging technology led businesses’.
Semantics aside, we believe that engagement is essential. Executives need to set up their organisations to identify the Fords and engage successfully with them. Our argument rests on the following observations:
- Some technologies (e.g. robotics) are already having a demonstrable impact on the economic performance of businesses. Few dispute that cost will be a key theme for insurers and brokers in the next 5 years, and insurers who are unable to raise productivity will suffer. Impact 25 Members that raise productivity through robotics are Cognotekt, Kryon and RiskGenius.
- We are already seeing that the leading insurtechs are becoming more selective about who they work with. This will lead to anti-selection for insurers who lag: they will see ‘normal’ volumes of insurech engagement but won’t realise that they are working with the Tinchers.
- Insurtech has ‘pivoted’ from distribution businesses (competing against insurers and brokers for customers) to supplier businesses (selling services to insurers). If insurers and brokers do not engage with these service insurtechs, startups could revert to competing against incumbents (e.g. through technology-led MGAs supported by alternative capital). Arguably this trend has already started with the emergence of ‘full stack’ insurtechs such as Coya, Ottonova, ONE and Element in Germany.
Insurers need to look beyond the hype and identify the Fords. We expand on our observations in section 2.
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