The insurer and InsureTech – a happy marriage?

By Tracey Smith, FinTech and InsureTech Lead at Direct Line Group (DLG)

Multiple exposure shot of a business group superimposed over a train track.

InsureTech has been the buzzword of 2017, with almost weekly conferences on digital innovation attended by 100s of insurers trying to understand how to be more innovative and move their businesses into the next digital age, whilst still wearing their suits! The time of large insurers being content and not looking to innovate is over. In a recent Accenture survey1, 86% of insurers felt they must innovate at an increasingly rapid pace in order to retain a competitive edge. Combined with ever advancing developments in technology; from the application of artificial intelligence, through to the emergence of blockchain technology and the changing demands of the digital savvy consumer, insurance has become an increasingly popular area for start ups. This has led to the emergence of the term “InsureTech”.

For insurers, InsureTech poses both an opportunity and a threat. There is awareness that the ‘Airbnb’ or ‘Uber’ of insurance could be just around the corner, and many argue that the industry is ripe for disruption. However, working with InsureTechs also opens up the opportunity to accelerate insurers’ advancement in innovation. With this in mind, most insurers appear to be embracing InsureTech and exploring how they can build relationships. These relationships can take a number of different forms:

  • Partnering with and buying services from InsureTech companies
  • Operating InsureTech incubators, for example: Aviva’s digital labs, Metlife’s Lumenlabs and Axa’s Kamet
  • Setting up venture capital funds
  • Investing in InsureTech companies as a strategic investor or acquiring them

So why does the insurer want to work with the InsureTech?

  • Speed and agility to develop, and ability to test and pivot their approach
  • They offer new approaches and ways of thinking
  • Access to new technologies
  • Access to new markets/ products and customer segments. This is especially true for the digital native millennial, where the current insurance model doesn’t necessarily appeal.

Why do these startups want to work with insurers?

  • Access to capacity, regulatory approval and underwriting knowledge. Insurance is complex and the benefit of being in the game for a long time is that insurers have built up a vast amount of knowledge on risk
  • Access to customers. Building a customer base is expensive; large brands spend millions on marketing to maintain and grow their customer base. New ways of marketing have opened up opportunities to market on a lower budget but the reality is that for every company that becomes mainstream there are 1000s more that struggle to gain traction and build a customer base (even with a great idea)
  • Insurers themselves are potential customers. The headline news in the InsureTech space goes to the companies looking to operate as insurers, for example Lemonade. In reality, the majority of businesses are looking at providing a service to insurers from bringing artificial intelligence into the claims process, through to introducing software to market products quicker
  • Access to resources and expertise. Running a business on a small budget with limited resources poses many challenges. However, insurers have access to these resources and are developing ways of helping startups

So is this a perfect marriage?

Like all marriages it is not without its challenges.  According to PWC 2017 research2 only 17% of insurers believe they are good at co-creating.

  • Challenges with InsureTech meeting IT security and compliance requirements. –This is essential for large organisations but challenging for startups, and so there is an opportunity for insurers to understand how they can help
  • Dealing with complex procurement and legal procedures. Insurers are looking at how they can work differently with startups; although there is a challenge that shouldn’t processes be improved for all suppliers?
  • Dealing with the reluctance to work with new companies over long established companies and fear of the risks involved
  • Implementation delays due to large volume of change within the insurer and the challenge of becoming a priority
  • Connecting new technologies into old systems, plus the costs and complexities involved
  • The ability of the InsureTech to deliver on their commitments without becoming too dependent on the insurer.

In reality, the relationship isn’t really at the wedding stage yet. To use the analogy, Insurers & InsureTechs have only been dating for a couple of years. They are more at the moving in stage; getting used to each others’ ways, working out how they can adapt and make the relationship work! But with the belief that they are better off together than apart!

The InsureTech and RegTech Venture Creation Weekend led by the Entrepreneurship Centre at Cambridge Judge Business School provides an opportunity to bring new ideas to this emerging sector. Our team at Direct Line Group is keen to offer aspiring entrepreneurs and innovators the chance to explore these opportunities and applications.

Tracey Smith, FinTech Lead at Direct Line Group, will be mentoring startups at the upcoming Venture Creation Weekend on 17-19 November 2017. For more information and to register your attendance, please visit the Venture Creation Weekend webpage.


1Accenture’s Technology Vision for Insurance 2017

2PWC & Startup Bootcamp 2017 InsureTech Report: Ready for Take Off

Tracey Smith

Tracey Smith

Tracey Smith is FinTech and InsureTech Lead at Direct Line Group (DLG), responsible for developing DLG's approach to InsureTech and executing. Working across all business areas, Tracey matches their strategy and priorities with the activities of the startups and looks for partnership and investment opportunities. She provides insight to the business on innovation in the insurance space and potential for market disruption. Prior to this role Tracey worked on DLG commercial business developing and delivering their strategy. Tracey has also held strategic and operational roles at the insurance broker Aon and previously worked as a cross sector consultant specialising in alignment and delivery of strategy. She has a keen interest in alternative business and the future business landscape. Outside of work she pretty much just plays rugby all the time in different formats from tag rugby through to 15s rugby union.
Tracey Smith

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