A match made in heaven?

If the customer experience is the bottom line, then it’s time for the industry to start working with insurtech instead of fighting it, writes Philipp Kristian Diekhöner

A match made in heaven?



A game designer, a hipster and a digital nomad meet in a boardroom. No, this is not a joke. Insurers are increasingly bringing customer-experience-focused talent from start-ups and major tech giants in to work in their newly established digital and innovation functions. In essence, they are building pockets of inspiration into a heritage structure. It’s a two-way street – many insurtech start-ups are founded by industry veterans that have left their safe, well-paying jobs and are looking to introduce a breath of fresh air into the industry.

The same can be said of start-ups and corporations. According to a recent report, a large chunk of venture capital funding volume comes from corporate VCs. While these are most likely involved in more late-stage deals, there is an evident trend of corporations getting more involved. Start-up accelerators (however critical we may want to be of them) have done much to foster this proximity.

In my view, fintech start-ups and financial institutions have increasingly come to realise that they benefit more from collaborating than competing. It paves the way to innovative operating approaches, such as institutional licence-sharing with start-ups. In some fintech verticals, the risk exposure that comes with running a financial services business serves as a perfect rationale for forming symbiotic relationships between disruptors and established players. Insurtech is a great example – take Slice and Munich Re, or Lemonade and their liaison with Berkshire Hathaway and Lloyd’s of London.

The more start-ups explore creating actual financial (especially insurance) products, the more potent and widely prevalent these mutual beneficial partnerships will become. They can serve as an effective strategy for managing regulation and reaching scale quickly via large existing pools of customers that have already been through the KYC (know your customer) process.

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The extent of collaboration occurring at the moment is almost antithetical to what public perception has made of banks in the years after the GFC. Goldman Sachs estimates that, globally, financial institutions represent a $5trn industry in danger of being disrupted by fintech companies, so the enthusiasm to collaborate may be driven in part by a well-developed survival instinct. Insurance, a vertical within finance that has been a little late to the innovation party, is possibly facing the most fundamental threats and opportunities. According to CB Insights, the insurtech domain attracted in excess of $1bn in venture capital funding in the first half of 2016 alone.

Perhaps the biggest discrepancy between corporations and start-ups is that the latter focuses single-mindedly on a specific customer problem, which means they are usually only solving one small wedge of customers’ overall needs. Most of us would need a variety of fintech services provided by different start-ups to take
care of all our financial needs – a great user inconvenience and a tremendous market opportunity, which I believe will be solved by new types of service aggregators for fintech, covering a range of functionality in one digital-native experience and customer proposition.

Life insurers would be in an excellent position to provide such a holistic value proposition, given that wealth management and life insurance both have a mandate to take into consideration a person’s overall fi nancial health. A financial planning one-stop shop would be a very ‘ownable’ territory for them, but it would require
incumbents to rethink the nature of their business. If we were to reframe their purpose from being a financially stable and dependable provider of long-term, big-ticket financial products to being a single place for people to take care of their present and future financial health, the industry would future-proof itself in a highly effective and relevant way. It would involve curating and working proactively with start-ups that are already providing the individual bits and pieces.

Overall, we should be highly optimistic about present and future interactions between start-ups and financial institutions, especially in the domain of insurtech. Both sides have a long way to go in terms of assimilating. Tremendous potential awaits progressive entrepreneurs and intrapreneurs who are resourceful and realistic about finding natural connection points that create mutual benefit.

Philipp Kristian Diekhöner is an emerging fintech thought leader in Asia and a pre-eminent voice in the Singapore start-up and innovation ecosystem. His vision is to shape the future of finance through customers’ eyes.

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