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InsurTech could cause a major disruption in insurance, but collaboration between the industry’s big players and startups are necessary to fulfil its promise
The momentum behind FinTech’s development shows no signs of abating. Driven by rising demand in China and Japan, global investment in the sector grew by 10% in 2016 to $23.2bn – and the forecast for the future is even more positive. Research suggests that cumulative investment in FinTech could surpass $150bn within the next three to five years.
But while the rise of FinTech itself is well documented, an understanding of a closely related industry is still at a more nascent level.
Insurance technology (InsurTech) is on the cusp of causing a major disruption in the insurance and re-insurance industries. Spurred on by innovation in FinTech and evolving customer needs, InsurTech looks set to fundamentally change the way in which insurance operates and is engaged with.
Unlike various forms of FinTech, however, a commitment to locate and harness the innovations that could unlock InsurTech’s potential is still somewhat lacking. While acknowledging the transformative impact that InsurTech could have on their business, research from PwC found that only 28% of insurance industry professionals actively pursue partnerships with those companies that could provide the necessary technology.
Instead, most industry players focus on technology that provides continuous improvement. This keeps them competitive, but doesn’t allow them to tap into the new developments that could disrupt markets in the same way that some sub-sections of FinTech have.
Much of the new capability and intellectual property exists within InsurTech startups, which are focusing on the rapid development of technology that could disrupt the insurance industry. But the complex and often restrictive nature of the industry’s regulatory environment means that many of these startups cannot enter the market alone, making partnerships between them and incumbent players mutually beneficial.
One of the Supplier-Enabled Innovation Center’s members, Swiss Re, offers a good example of this strategy in play. Last year, the re-insurance company established an InsurTech accelerator in the startup hub of Bangalore, India, with the express purpose of locating and developing innovation.
Speaking to Tech in Asia, Swiss Re’s Head of Strategic Initiatives in Bangalore, Amit Kalra, explained that the types of innovations they were looking for encompassed data analytics for predicting health outcomes, to artificial intelligence for smarter customer engagement.
Kalra echoed the point that startups and big insurance companies are well suited to collaboration. “InsurTech startups are innovative, agile and tech-focused," he said. "But they may not be fully evolved when it comes to having a strong understanding of global insurance-industry dynamics, regulatory environments, and data-protection challenges. Therefore, it is critical to connect technology and innovation with global expertise.”
In the first phase of its accelerator program last year, Swiss Re chose six startups and provided resources for them to develop their innovations, including operational support, grants, and office space. At the end of the program, the six presented their innovations to Swiss Re’s senior management, with a view of incorporating them into the company’s new-look business model.
Put simply, by offering startups resources and, prospectively, a platform for their innovations, Swiss Re is able to access the new technology that it needs.
The approach offers a good example of the new types of collaboration and partnerships that are required in current times, where incumbents are being disrupted and scale is no longer seen as a fundamental differentiator.
While SEI is predominantly focused on improving the collaborative efforts taking place between organizations and their suppliers, we must also open the door to the intellectual property being developed outside of our traditional networks.
This includes startup communities, universities, even one-man-band garage inventors – all of which are working on the type of IP that might, one day, disrupt an industry. FinTech, and by extension InsurTech, are two examples of such disruption taking place – and they’re two examples among many.
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