Insurtech – the hard reality of delivering

As the dust settles on the insurtech hype, DQPro Co-Founder Nick Mair gives an update on the state of the market and what 2020 holds for collaboration between speciality (re)insurance and technology providers.

Are large insurers geared to embrace new ideas? This is the existential question that the insurance industry has been grappling with, even before the term insurtech first crept into use just a few short years ago.

I could be blunt here and say the answer is ‘no’, but it is naturally more nuanced than that (isn’t it always?).

Innovation and contradiction

Dedicated innovation teams have helped carriers understand emerging technologies, but most large insurers still lack the agility to quickly integrate new technologies into their day to day operations. There remain huge contradictions. On one hand there’s an innovation lab, on the other, an 18-24 month procurement process and complex contractuals remain frustratingly common.

Large carriers need to take a holistic approach to embracing new ideas. For innovation to move the needle, all business units must increase their agility, even the most mundane.

Solving pain points

The bulk of new insurtech startups continue to focus on B2C and SME/personal lines, but increasingly founders are turning to the immediate needs of large commercial (re)insurers – providing solutions to long standing pain points across both underwriting and back office operations.

In the 2019 Oxbow Partners Insurtech Impact25 report on the top 25 insurtechs to watch, there were a total of 19 insurtechs with an application in commercial and specialty listed and DQPro was one of only six data-focused companies included.

In the context of general insurance, the Oxbow report stated, “We see many incumbents engaging Supplier insurtechs to improve their own operations.

Activity is clustering in three main areas: data and analytics for risk selection and pricing; specialist insurance systems for certain products or channels; and claims. Some (re)insurers are also focusing on distribution opportunities.”

Not all new ideas are created equal

There are key differences between carriers partnering with a VC-backed insurtech, and partnerships form with bootstrapped / self funded operations.

Those insurtechs backed by VC funds will soon be under pressure to find their product / market fit and make sufficient returns. The VC focus has created both a funding gap and an amazing opportunity for insurtechs focused on solving problems that are below VC interest, but which are valuable to the value chain.

This is where incumbent backing can make a difference – whether via smaller scale funding or by productive and agile collaboration.

Insurtech riding the reinsurance wave?

The next wave of insurtech will increasingly focus on the reinsurance sector, where a key challenge is the size and complexity of data sets used to quantify and price risk.

Whilst it’s not specifically more challenging to work with reinsurers than direct insurers, there are very different pain points when it comes to their data quality and confidence, particularly given the differences in source systems and data aggregation.

Regardless of the carrier, the recipe for successful collaboration is similar;  a strong business side sponsor with a pain point to ease and engaged and supportive and IT teams for implementation.

Forming strong business relationships has helped us overcome an even bigger challenge – that of continued M&A activity.  When one large reinsurer was acquired mid roll-out, our senior sponsor helped keep things moving and ensured the continued focus amongst teams we required for success.

Integration post acquisition

M&A has wider implications for system integration and data oversight that we strongly feel the (re)insurance market must recognise and address as early as possible into deals, to prevent inefficiencies, errors and lack of oversight post-acquisition.

Now the insurtech hype cycle has arguably peaked, we’re in the cold, hard reality of delivering, of making a difference to day to day operations. Success relies on continued vision, leadership and the ability to continually learn and iterate to achieve the desired objective.

The potential for new technology is clear but it’s time to leave the conference halls and actually get on with doing it.

Book a DQPro demo today.

Further reading:

Overcoming the challenges of insurtech collaboration – Insurance Day – quoting Nick Mair:

Oxbow Partners Insurtech Impact25 report:

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