Health Insurance

Insurtech firms are starting to win the hearts of big insurers

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A growing number of insurtech start-ups are looking to partner with traditional carriers rather than topple them. Closer co-operation between emerging insurtech firms and well-established big insurance providers is likely to benefit both parties – and their customers.

The appearance of legions of insurtech firms across the world has spurred big insurers to invest heavily in digital technology.

Many well-established insurance companies are concerned that these tech-savvy newcomers will win over their customers, erode their profit margins and dominate new lucrative markets. Such fears are not without substance. However, the biggest impact of insurtech firms on the insurance industry might not be increasingly fierce competition. Instead, it could well be greater co-operation.

A growing number of insurtech start-ups are looking to partner with traditional carriers rather than topple them. This trend is taking place throughout the financial technology (fintech) arena, which encompasses the insurtech sector. Investment in fintech companies that are aiming to collaborate with established financial services companies leaped 138 percent last year. It accounted for 44 percent for all fintech funding. This trend is likely to continue.

During 2016, a drove of big insurance providers have announced tie-ups with aspiring insurtech start-ups. These alliances spanned the whole of the insurance industry’s value chain. They encompassed distribution, underwriting, policy issuing and claims processing.  Recent partnerships include AXA’s UK tie-up with on-demand insurer Trōv, Hannover Re’s US collaboration with digital life insurance provider Ladder; Munich Re’s alliance with German online insurer Simplesurance, and the purchase by Hartford Steam Boiler, a subsidiary of Munich Re, of Internet of Things start-up Meshify.

Furthermore, major insurers such as AXA, Transamerica, American Family, Ping An and MassMutual are forging close ties with innovative insurtech start-ups by providing them with early funding.

Closer co-operation between emerging insurtech firms and well-established big insurance providers is likely to benefit both parties – and their customers. Start-ups will get much needed access to capital, distribution channels and industry knowledge. Traditional carriers will benefit from early exposure to advances in digital technology, insights into new market opportunities and contact with entrepreneurial business models. Insurance customers stand to benefit from the quicker roll-out of innovative, highly-personalized digital insurance solutions that may be more cost-effective and flexible than traditional offerings.

To encourage collaboration between insurtech firms and traditional insurers, we’ve extended the scope of our FinTech Innovation Labs. During 2017, our London lab will nurture a handful of insurtech firms, among its annual intake of fintech start-ups. Our other FinTech Innovation Labs, in New York, Dublin and Hong Kong, are likely to follow this lead.

Every year the four FinTech Innovation Labs each host a three-month accelerator program that helps start-ups build relations with big financial services firms and major investors. Out of thousands of applicants, more than a hundred start-ups have, so far, graduated from our FinTech Innovation Labs and have been selected to showcase their offerings to potential investors. They’ve gone on to raise US$535 million in funding.

Early next year, two of the eight start-ups pitching to investors at the London lab’s showcase event will be insurtech firms. I’m looking forward to plenty more.

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