Insurtech investment is growing quickly, not just at global level, where insurtech fundraising will likely reach $6 billion in 2019, but also within insurance companies that are putting their money where their mouth is with their focus on technology-enabled solutions.
“Nationwide has a relatively large venture capital group. We’ve committed to spending $100 million on start-ups and have made an immense amount of progress,” said Brad Barnett, vice president of emerging businesses marketing at Nationwide, in conversation with Insurance Business at InsureTech Connect (ITC) in Las Vegas. “In the start-up space, we look at one aspect as investment, but the thing that we’re going for mostly is partnerships – we want to find their secret sauce, plug them into the parts of Nationwide where it makes sense and leverage their capabilities – and hopefully, that makes a return over time.”
Announcements in recent months have further underscored the solidifying of insurer-insurtech relationships. Just take a look at the Assurance-Prudential deal that saw $2.35 billion trade hands, or Next Insurance’s $250 million funding round from Munich Re.
To stay on top of the many opportunities that insurtechs are proposing today, Nationwide’s venture capital team is constantly evaluating trends in the marketplace as well as identifying where the company can be more efficient and find new sources of value for customers.
“Where [the team goes] hunting, so to speak, is largely based on what [a particular] business unit says are opportunities for them. They have to – otherwise it’s impossible to narrow your focus for a relatively small team at Nationwide,” explained Barnett, adding, “When you’re investing $100 million, it’s a big number and especially in the innovation space, you’re constantly proving that the investment was worth it. At some point, you have to have [what we call] some internal patience, so letting things play out over time to see if this is going to be a venture capital partner that’s going to be able to scale and is going to be successful.”
From the perspective of a wholesale brokerage, an event like ITC proves just how many insurtechs are out there today, offering a solution to a tiny problem that a brokerage might have.
“What we’ve seen this year is almost tenfold the amount of companies that are here, presenting their services and micro-services,” said Bryan Guilbeault, vice president of business technology at All Risks. “[There’s] a whole wealth of new companies here offering different, little services that we could tap into as a wholesale broker and be able to get additional information to use in our process of vetting submissions. It’s almost overwhelming this year, the amount of companies that are here.”
However, with wholesale brokers getting a small piece of the premium dollar, these companies have to carefully evaluate both the chinks in the armour they want to fix – mainly in streamlining the application process – as well as which technologies will prove valuable over the long-term.
“We only get 10% to 15% of the premium dollar and that’s the budget that we have to go with, so we don’t typically chase technology. We have business needs, and we go and try to find the best technology to fill that gap,” explained Guilbeault.
Some start-ups will offer a solution that makes sense for the wholesaler, but it might not be sustainable as the volume of business grows.
“A lot of them are one, two, or three years [old] and they don’t really have any track record of what they’re offering, so we’re constantly looking at our business requirements, what are our business needs, what tech are the companies out there offering, and then how well does that technology fit in with our foundation to allow us to grow?” added Guilbeault.
A key business need that All Risks has is having accurate, value-added data that can be used to make business decisions in real-time. The holes that can be plugged in the application process with this dataset contribute to making this process more efficient, in turn helping to expand the wholesaler’s market share. After all, with all the talk of how Amazon is changing buying habits among consumers, the expectations of retail agents (the wholesaler’s client) are likewise evolving.
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“We all treat the internet like we’re buying something off Amazon. Insurance is different, especially in our market where we’re non-standard E&S, but the retail agents still want to be able to get self-service, be able to get at those quotes fast, and be able to get information faster,” said Guilbeault. “The retail agent wants to be able to service their client – their insured – as fast as they can and the insured’s attention is short. They want to be able to get back to them either immediately or within the day, depending on what they’re asking for.”