InsurTech: A Force for Good — How InsurTech can reconnect insurers with their customers

InsurTech: A Force for Good — How InsurTech can reconnect insurers with their customers

19-Jul-2016 by Kristin Bell

Startupbootcamp InsurTech’s 2016 Trend Report in association with PwC focuses on how InsurTech can reconnect insurers with their customers while simultaneously boosting the bottom line.

To read the full report, click here.

The insurance industry has a reputation of distrust amongst customers, leaving these customers feeling alienated and disengaged. This trend report dives into the aspects of InsurTech that will benefit insurers and allow them to reengage with customers. These new players are reshaping the landscape by designing new products that meet changing customer needs, by establishing greater levels of transparency, and by delivering new forms of data and risk insight to improve underwriting accuracy and loss prediction. These new entrants are currently positioned as enablers, rather than disruptors, and will complement insurers’ offerings rather than replace them.

Some key findings from the report are:

  1. Whilst InsurTech is rapidly growing, it has not yet reached the large scale of the FinTech industry. However, this is changing very rapidly as startups, investors, and the established insurance industry increasingly focus on the potential of InsurTech innovation. The first quarter of 2016 received more investment than ever before in InsurTech businesses, with deals raising $650m. Whether from a defensive or offensive position, more insurers are beginning to engage, and we will see investment in InsurTech grow even more dramatically.
  2. InsurTechs are more likely to operate as enablers than disruptors. We see this in the top themes  that are shaping InsurTech, which include enhancing interactions and building trusted relationships, meeting changing customer needs with new offerings, leveraging broader ecosystems, enabling the business with operational capabilities, leveraging data and analytics to generate risk insights, and new approaches to underwriting risk and predicting loss.
  3. The majority of InsurTech start-ups are innovating in customer-facing areas. 35% of applications—the largest volume of applications to Startupbootcamp InsurTech—came from start-ups aiming to enhance the quality and frequency of insurer’s interactions with customers and, as a result, build more trusted relationships with them. This reflects the evolution of the broader digital economy, where customer expectations are constantly increasing—customers want high levels of service and engagement from businesses, that includes retail, leisure, and even insurers. This is tough for the insurance industry, which has traditionally focused on distribution through brokers and financial advisors, so it typically lags behind other industries in its ability to provide seamless, multi-channel customer experiences.
  4. Many insurers see InsurTech’s huge potential for transforming the back office. This theme represented 21% of applications to Startupbootcamp, and 38% of corporates considered this theme impactful. A significant number of applicants offer solutions that could improve the way insurers operate. By increasing the efficiency of insurers’ back office processes and systems, these start-ups have the potential to enable insurers to operate more profitably at a greater scale.
  5. Leveraging emerging technologies is one way in which InsurTechs innovate, but not the only way. Powerful innovators do more than simply disguise an existing interaction. They combine digital with the human touch, often using technologies such as artificial intelligence (AI), machine learning, and robotics. AI has been useful to underwriting and its application in distribution is helping insurers increase conversion results. Developments in this area are good news for customers, who will not only appreciate easier and more convenient interactions with insurers, but also reap the benefits of a stronger relationship with their insurer.
  6. Collaboration is the biggest opportunity of all. More emphasis is being placed on partnerships, as insurance companies are partnering with InsurTech start-ups that align to their corporate strategy. Large corporates bring attributes, such as their data, their underwriting expertise, their credibility, and their goal capabilities, as well as their ability to help InsurTech startups to scale. The start-ups provide new ways of thinking, entrepreneurial drive and ambition, a more customer-centric approach, and often very detailed understanding of a complex issue in the value chain. Start-ups are also more agile and can work at quicker speeds and with less constraints than large corporations. In fact, 80% of Startupbootcamp’s corporate partners are actively engaged in partnerships with start-ups.
  7. Contrasting cultures present both a hurdle and a learning opportunity. Incumbent insurers recognize InsurTech start-ups are bringing change to their industry. PwC research shows 90% of executives at established companies believe at least part of their business is at risk from the challengers. The approach that an insurer takes to co-operate with InsurTech players may include: partnerships, acquisitions, corporate venture arms, digital innovation labs and internal innovation initiatives, and rethinking organizational structure.

Moving forward, as InsurTech start-ups evolve and their collaborations with incumbents develop, they will be confronted by new challenges and uncover new opportunities. Both insurers and start-ups have the ability to embrace opportunities to work together.

Here are four areas to look out for:

  1. Emerging block chain use cases
  2. Robotics
  3. The rise of the sharing economy
  4. Colonizing the entire value chain

Find more details in our report here.

We are just beginning to witness the potential applications of new ideas, technologies, and processes from InsurTech. These InsurTechs present an opportunity for insurers to reconnect with customers who have become disengaged and to serve these customers more efficiently and effectively. So much of what start-ups are offering is enabling rather than disrupting, and insurers will need to embrace the collaborative ecosystem that is now developing and work alongside InsurTechs and stakeholders.

 

Kristin Bell

Global Head of Marketing, InsurTech
Startupbootcamp InsurTech and Hartford InsurTech Hub