Insurtechs using capital windfalls to boost development and prompt innovation – report

These firms are pressuring incumbent insurers to up their efforts

Insurtechs using capital windfalls to boost development and prompt innovation – report


By Ryan Smith

Insurtech and bigtech players are leveraging significant capital inflows to boost technological development and spur innovation, according to a new report from Capgemini and Efma.

According to the World InsurTech Report 2021, new digital players are offering greater personalisation and an emphasis on customer experience, putting pressure on incumbent insurers to up their game. In response, incumbents are partnering with or acquiring insurtechs in an attempt to strengthen their own tech capabilities.

The report found that tech giants and insurtechs have secured unprecedented access to capital allocation from investors – and they’re using that capital to bolster their digital capabilities, widening their lead as frontrunners in innovation.

Between 2018 and 2020, the five biggest tech companies and a major auto manufacturer that offers insurance services added almost 2.5 times the total market capitalisation of the 30 largest insurers in 2020. By the end of 2020, the total market cap of listed insurtechs had surpassed $22 billion, the report found.

The COVID-19 pandemic spurred customer intention to purchase insurance (up by 7%). The report found that policyholders are increasingly drawn toward insurers that offer a “CARE” (convenience, advice and reach) approach.

“Today, policyholders no longer waver when it comes to dropping a provider in pursuit of a more relevant CARE solutions provider,” Capgemini and Efma said. “For the first time, 50% of customers today are willing to consider coverage from a new age player.”

Insurtechs are using their investor-capital windfall to further improve their CARE offerings through digital technologies, the report found. And although only a quarter of incumbents are confident in their data-handling abilities, they’re taking steps to change that. Many traditional insurers are partnering with or buying insurtechs to enhance their capabilities and value proposition.

“The insurance industry is evolving. The keyword for the future is modularity,” said Anirban Bose, CEO of Capgemini’s Financial Services and group executive board member. “Insurers must be prepared to tackle a broad range of future scenarios. Modularity offers, system and organisational structures will be indispensable to creating a robust and responsive value change. In the coming years, industry players will be defined by their strength within a hyper-specialised value chain, and insurers will increasingly become orchestrators.”

“Insurance is moving from product selling to customer CARE and protection,” Capgemini and Efma said.

The report predicted the emergence of two scenarios as a result of continued access to capital:

  • Embedded insurance as a value-add within third-party ecosystems: Coverage embedded at the point of sale or point of service, becoming nearly invisible. This scenario evolves toward a B2B2C system, where ecosystem partners control customer relationships.
  • Added value at the core of complex offerings: In this scenario, insurers would evolve from selling products to offering predict-and-prevent propositions enabled by AI and analytics.

“As traditional insurers expand their ecosystems to remain competitive, they must increasingly consider the value achievable through trusted partners, including bigtechs, insurtechs and non-traditional players like original equipment manufacturers,” said John Berry, CEO of Efma. “The numbers clearly suggest that exponential insurtech growth is here to stay, so delivering superior customer CARE is essential. Future success in the industry will depend on players’ existing capabilities across the value chain, willingness to invest, and desire to own the customer relationship.”

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