"As money continues to pour into insurtech ventures, there is evidence that only the big, global technology players and true venture capital firms have pockets deep enough to precipitate true disruption in the insurance space." Simon Hayes Intelligent Insurer 11/12/2018
Hayes explains that
- Insurtech startups themselves lack the financial backing to truly disrupt the market as full-stack insurers.
- Incumbent insurers are unwilling to invest the necessary amounts to achieve revolutionary disruption
Willis Towers Watson notes that addressing “distribution costs, claims handling and underwriting excellence”, are some of the biggest challenges incumbents face in their value chain – making companies in this space an attractive investment to an incumbent player. The incumbents may have another reason for holding back however.
There are mature insurtechs that already deliver complete value chain solutions such as 360Globalnet. Proven and scalable with over 3 million claims already processed from self-service FNOL to settlement.
Why risk invest when the product is already there? The issue for incumbents is not finding the technology to anticipate and lead disruption but doing so fast enough to avoid being a laggard. McKinsey presents compelling evidence that there is only room for first movers and fast followers - just 4 to 5 in each sector. These will win the lions share of premiums and profits. See Exhibit 4 in "Time for insurance companies to face digital reality"
The long tail of laggards will share a dwindling pool of profits.
Speed of deployment is now the issue rather than the technology. So chose a proven insurtech and plan the vision, strategies and cultural change to exploit the value of those platforms. Now- not in two years time.
Incumbent insurers should by now have moved beyond deploying digital platforms to
- Adding real-time data/analytics and decision making technologies to enhance the platform's effectiveness.
- Choosing partners that have effectively "uberized" services such as subsidence, drainage & escape of water, auto repair networks
It is only by leveraging all three that incumbent insurers will be the disrupters rather than the disrupted. Pity insurtech startups that have not developed a complete value-chain solution and lack sufficient funding.
The question is, is Europe and the US worth the effort? Insurtech entrepreneurs who really want to innovate and create the biggest disruption in the insurance industry, as full stack, digital insurers, can surely learn from companies like Zhong An. They will need, however, the backing of the next generation of investors, with bigger budgets than the traditional VCs and incumbents. It is certainly starting to appear that, unless the more forward-thinking incumbent insurers start to dig deeper into their very deep pockets, it will be VC firms and technology companies that could lead the way in revolutionising the industry – potentially taking the spoils as they do so.