The insurance industry is evolving at a rapid pace. Insurtech start-ups have entered the global playing field with a distinct swagger of youth and fearlessness.
Tech is changing the way insurance is distributed to the client and major incumbents need to keep up – even if that means embracing, investing in or acquiring the boisterous new kids on the block.
Matt Wong, senior research analyst at CB Insights, said insurers must consider their strategy when it comes to the insurtech revolution.
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Speaking at a CB Insights Future of Fintech event, he said: “Insurance start-ups have certainly arrived. Product innovation is changing the insurance space and a host of new data sets are making their way into the underwriting process.
“We have also seen a change in consumer preferences. Today’s insurance consumers have different demographic and psychographic preferences. Look at sites like Lemonade, which bring a thesis that maybe consumers are interested in pursuing more digital insurance offerings. We are starting to see that thesis taking hold.”
Two areas insurtech start-ups have targeted well are the personal lines and small commercial markets, according to Wong. They are offering more tech-driven specialised coverage to help small businesses better manage their insurance.
There is pressure for insurers to stay up-to-date with emerging technologies and embrace those that complement vital parts of the insurance value chain. Wong said the engagement with insurtech is growing but “these things take time”.
“We have definitely seen a lot of response by carriers and reinsurers in a lot of different ways, whether that’s tracking investments or building partnerships,” he noted. “Strategic investors are starting to take lead investments in start-up companies.
“For example, Munich Re is actively investing in and partnering with start-ups. They are moving fast in terms of integrating themselves in the start-up ecosystem. A lot of insurers are also thinking about acquiring this talent as well as the technology.”
So, what are the key points of interest going forward? Developments in artificial intelligence (AI) are important to look out for, according to Wong.
“We are seeing a lot of interest bubble up around different usages of AI machine learning, whether that’s on analysing data sources to help underwriting, or applying that to claims,” said Wong.
He added: “We are seeing a lot more distribution partnerships and perhaps we will see more collaboration on the fintech side in the near future.”
The big challenge is for insurers to innovate and embrace development to help them stay as the primary interface in an evolving market.
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