Editorial: Businesses should think twice about being an insurtech

Consideration needed before making the leap

Editorial: Businesses should think twice about being an insurtech


By Jen Frost

The word ‘insurtech’ boomed into the insurance consciousness in the 2010s, when a bundle of new businesses made it a mission to “disrupt” or bring “innovation” to insurance products and distribution.

Fast forward to this year, and you need look no further than the Target Markets annual summit, a US program and MGA event, to see just how out of fashion being an ‘insurtech’ could be becoming.

“What we’ve told literally all our clients over the last year is do not talk about being an insurtech,” MarshBerry managing director Gerard Vecchio said while appearing on a panel at the October Arizona gathering.

Vecchio, a 30-year insurance industry veteran, likened the “burst in the insurtech bubble” to fallout from the dot com boom days.

Insurtechs are “not changing the fundamental nature” of insurance, Chubb CEO Evan Greenberg said at another event a year prior.

This was a sentiment perhaps not shared by a large portion of his audience, because Greenberg was speaking at Insuretech Connect, an annual conference that regularly draws thousands of insurtech enthusiasts and organisations to Las Vegas, Nevada.

Insurtech is “just hype”, Greenberg told them, nevertheless.

The industry leader must have watched unsurprised, then, as this year – admittedly in the face of a worsening economic outlook – some insurtechs scrambled to make layoffs in the face of a tough path to profitability, scrutinous investors, mischannelled growth, and a disappointing stock performance for those that have gone public.

And it’s not just insurtech. The tech sector more broadly has been facing up to some whopping layoffs and turbulence, with giants Amazon, Twitter and Facebook seemingly not immune.

Doesn’t seem like the best time to be putting on that insur ‘tech’ label, right?

Well, yes and no. It depends on you and your business.

We have seen some insurtechs come in and find very real and untapped gaps in the market and, dare I say it, drive change in areas like usage-based insurance and the gig economy to name a couple.

Purse strings have tightened, but funding has not dried up for everyone. While total global insurtech funding continued to shrink into Q3, the quarter did see the second-highest number of seed funding deals ever recorded, while mega-round funding of $1.2 billion was more than double that of a difficult second quarter.

The strongest businesses almost inevitably will survive the “Darwinian scythe” – as Gallagher Re head of insurtech Andrew Johnston has put it – and pull through. The level of achievement they reach is yet to be seen, but there will more than likely be success stories.

Losses, too, are not unusual for young growth-focused businesses and do not necessarily indicate failure if capital believes the company will achieve more in the longer term and the appropriate pivots are made.

In Johnston’s words, insurtechs have increasingly left behind the “hubristic rhetoric” of disrupting the industry. Aviva and Lemonade’s UK partnership could be seen as a watershed moment.

Insurtechs may not have proved mega disruptors or fundamental insurance changers yet, but many have proven innovators – and have probably pushed the industry to work harder and faster in the face of loud competition.

Let’s be real, though. Most good insurance businesses don’t need to reinvent the wheel to succeed.

They may use technology in great ways to their advantage. They may “delight” clients and partners.  They may build an excellent business. They may sell hard to find products. They may use an app or a website.

But what fundamental problem are they looking to solve? And do they need to be insurtech to do it?

If you really do have a never-before-seen proposition, presumably tech enabled, that sets you ahead of the crowd then why not call yourself an insurtech. If you’re a frontrunner to address a gulf-sized protection gap or a massive problem for clients or the market, then perhaps the tag might be for you.

Others, however, may want to think twice about who they are and what they’re trying to achieve by slipping on the label. Particularly distributors and MGAs.

Ask yourself: should my business be an insurtech? Is this going to help me?

It may be more sensible to “avoid the noise”, as Vecchio put it, and effectively focus on talking about what your business can do, rather than putting yourself into a bucket you don’t need to be in.

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