How to Find the Ideal Insurtech Mate in a Jungle of Options

As the Indian summer comes to a close, and I prepare for our global user conference I have been reflecting on the insurtech market once again.

Perhaps something people missed was the Willis Towers Watson and CB Insights Quarterly InsurTech Briefing Q2 2019 published in July. It is well worth reading and watching the video here.

A headline-finding of the report was business as usual for insurtech investments. For the fourth consecutive quarter investment in insurtechs exceeded $1.2 billion or to be precise $1.41 billion.

There was another finding that stood out for me. The number of strategic investments by insurers and reinsurers into private tech companies reported for the quarter was 26; according to Willis Towers Watson and CB Insights this represents the highest quarterly total since they began tracking insurtechs.

This finding very much fits with what we are seeing. Despite earlier anticipation of significant disruption by insurtechs, they are not necessarily disrupting, and not just surviving, but thriving as an integral element of the insurance industry; enabled by insurers who have the technology platforms to take advantage of an insurtech’s innovation in everything from a process, to tackling fraudulent insurance claims, to creating a new insurance product category.

For these investments to work, one of my colleagues, Neil Betteridge, shared with me a checklist for how insurers should engage with insurtechs who are increasingly keen to collaborate and work in partnership with traditional carriers.

Neil advises:

1. As they evaluate insurtechs, some insurers get fixated on the technology. This is a mistake. The right path is to focus on the business goal, consider how to get there, and then how technology will assist in this process.

2. Insurers need to be intentional and know themselves totally. They should ask themselves if they are manoeuvring on insurtechs to try to gain some understanding of the technology’s possibilities, or to pick up some crucial technical capabilities that they intend to leverage in their operations imminently. Either approach is perfectly acceptable, but it is important that insurers avoid potential woolly thinking like, “Let’s hang out with the cool kids,” to magically imbibe some cool tech. Self-awareness about an insurer’s culture is important to effective collaboration with start-ups that have quite different working styles and decision-making practices.

3.  The biggest success factor for engaging with an insurtech comes from thinking about the core business problems that need to be solved. When insurers find suitable insurtech partners who can help address business challenges, they must not saddle the project with onerous expectations. Insurers should begin with a manageably small scope and gather some evidence of success within a realistic timeframe. The bottom line here is that insurers need to work flexibly with insurtechs.

4.  Evaluation of an insurtech partner for the long term is fundamental. Innovation is great, but does the Insurtech have a plan and the capital to keep pace? An insurer might want to use insurtech technology to shake up operations or marketing, but it is vital to assess and understand just how well that technology will integrate into front and back office standard systems and processes. While proofs of concept can be appealing to insurer and insurtech alike, both only truly realize material benefits when the insurer is able to leverage the technology at scale.

Wise words I believe. And, of course, as we enjoy the golden autumn colours, don’t forget to check out the Q3 report. Will we have another quarter of healthy investment and strategic partnerships?