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The Evolution of Insurtech

By Rita Yates, CEO, Insurtech Australia

Rita Yates, CEO, Insurtech Australia

Insurtech Australia is the industry association with a mission to build a world class insurtech ecosystem across Australia. In the last two years since inception, Insurtech Australia has grown to over 60 insurtech members and 24 corporate partners. Insurtech members’ propositions broadly fall into one or multiple of the following five categories: new products delivering better customer value, innovative marketing and distribution, underwriting and pricing agility, efficient insurance administration and smarter loss prevention and remediation.

Globally, the insurtech revolution was born from two key drivers, namely the ease of access to new and highly developed technology (including AI, platforms, big data and analytics) and significant changes in customer expectations and demands which generally speaking, are not being met by the insurance industry. Global investment in insurtech has also been rising steadily year on year since 2014 with quarter global investment surpassing $1 billion for the last five quarters.

"Global investment in insurtech has also been rising steadily year on year since 2014 with quarter global investment surpassing $1 billion for the last five quarters"

The insurtech ecosystem is somewhat unique in that the majority of insurtech organizations are looking to partner with incumbents and many incumbents don’t want to do everything internally. They are now looking to find insurtechs to work with that can solve some of their pain points. This ultimately creates a very collaborative environment rather than a purely disruptive environment.

Headway has been made over the last 12 months with our annual ecosystem report 2019 showing a 70 percent increase in the number of partnerships in our ecosystem. These partnerships remain in the early stages for the most part but show a maturing approach from the incumbents who are very much acknowledging working with insurtechs as an opportunity and not a threat and are now building collaboration into their digital strategy. We have also seen partnerships take various forms including strategic investment, joint ventures or collaboration.

A number of barriers do still exist and hamper the efforts of insurtech/incumbent partnerships. Some of the common barriers that we commonly see often revolve around the size and structural differences between startups and insurtechs. There tends to include a significant speed differential between the two and the ability to implement a test and learn environment conducive to innovation is not always easy in an incumbent organization with many layers. Approaching insurtech partnerships with a short term lens by trying to assess a return on investment of 12 months or so is also a trap many incumbents fall into. Generally many of these partnerships should be assessed on value with a medium to long term view and one which will ultimately work toward helping to achieve long term transformation goals within the business. High level sponsorship, support and funding allocated toward successful pilots and partnerships traditionally have also often not necessarily been built into the overall business strategy.

There are a number of things that insurance incumbents can do to help overcome these barriers. First is to have a clear idea of the pain points within their business where there is willingness to explore using external technology to solve problems and building partnerships and collaboration in to their overall business strategy. An internal fast track to partnership approach can also help recognize that startup and scaleup insurtechs are not the same as other vendors or partners. A fast track approach will include an approach to partnership which could involve more succinct legal agreements, procurement processes that are fast tracked, sufficient budgets towards working with insurtechs and considerations to make the operational aspects of partnership more efficient. Acceptance on both sides of the speed differentials and governance structures differentials can help both organizations meet somewhere in the middle. Finally focusing on the culture within the organization and building on one where innovation is at the core can help build an environment where experimentation, pilots and a test and learn environment becomes the norm.

There is no doubt the insurance environment is changing at a rapid pace and for incumbent organizations to keep up and ahead of the curve, being open to working in partnership with innovative insurtech organizations may be one of the keys to future success. The opportunities are abundant and readily available for insurance organizations to explore.

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