Is insurtech actually a thing?

24th April 2018

It is impossible to avoid insurance articles that refer, at least in passing, to something called insurtech. But... what exactly is insurtech? Is it really a thing?

We're probably all happy that the word is a combination of insurance and technology, inspired by the related fintech (financial and technology). But, other than that, what is it? On closer inspection, insurtech seems to be a rather imprecise catch-all term. There are a lot of people who can tell you very definitely what they think insurtech is. But they all seem to tell us slightly different stories.

On the one hand, some use insurtech to refer to any and all technology innovations that could be applied in the insurance industry. On the other, it is a growing business sector in insurance that exploits the practical use of such innovative technology... and then, with both hands already full, we find that some even use the term to refer to an actual company that offers, supplies, or makes use of such technology.

Content-wise, insurtech includes a multitude of exciting technologies such as Artificial Intelligence, Big Data, the Internet of Things... the list is potentially endless. With these technologies, it promises innovation and enhancement across all insurance business areas - Customer Engagement, Data Analytics, Information Security, and so on. You name it, insurtech can or will do it.

At the moment, insurtech seems to be pretty much all things to all people.

In the main, it receives positive press. Look at these two headlines taken at random from a search for #insurtech on twitter:

Artificial Intelligence will change the evolution of technology – a quote from Ash Dhupar, Chief Analytics Officer, Publishers Clearing House

7 Ways the IoT Can Change the Business World by Suzanne Elly,

These headlines certainly give the impression of great things to come. Insurtech has entered our vocabulary and there is definitely something happening. It is safe to say insurtech is a thing.

What about insurtech startups?

The investment and activity surrounding the insurtech movement started several years ago and since then multiple startup companies have attracted huge excitement, not to mention funding. The belief is that the insurance industry is ripe for innovation and disruption, and that insurtech enables the exploration of avenues that large insurance firms have up to now failed to exploit.

According to Mark Breading, a partner at Strategy Meets Action (SMA), they are tracking over 1,200 insurtech startups. In addition, approximately 50 (re)insurers have insurtech investment arms, and there are many more insurers engaging in partnerships, pilots, and insurtech strategies. This is big business!

For an insight into this new world we need look no further than an organisation called Startupbootcamp. They run programs to accelerate the growth of early-stage tech startups across various industries. Originally founded in 2010 in Copenhangen, they now have hubs in London, New York, Singapore, Berlin, Amsterdam and other centres worldwide.

Startupbootcamp claim that their Startupbootcamp InsurTech is "the first truly global insurance accelerator working alongside a large portfolio of leading insurance players to foster disruptive and collaborative insurance innovation from early stage start-ups."

For example, in November 2016, following a rigorous selection process, Startupbootcamp selected the following 10 companies for their 2017 InsurTech cohort:

There are some truly great and diverse ideas here. However, none of the insurtech listed in this group can yet lay claim to changing the evolution of technology or the business world and, to date, none of these brands have become global household names.

Can insurtech startups succeed?

I have just read a fascinating article, Five Dispatches from InsurTech Survival Island, written jointly by Matteo Carbone, director of the IOT Observatory, and Adrian Jones, an insurtech investor. They focus on three insurtech startups in the United States that have chosen to become fully regulated insurers, namely Lemonade, Metromile and Root.

If you are interested in insurance, unless you have been under a news blackout for several years, you will have at least heard of Lemonade. This company, viewed as a shining example of the new kid on the block, has attracted some great PR - and the praise is well deserved.

But the comparative information that Carbone and Jones present about these three startups makes very interesting reading. In particular, the following table from their article compares data from each organisation's published statutory financials for the year 2017:

These figures show that all three startups are a long way short of being commercially successful yet.

This is not a negative message. It is a reality check. Insurance is not easy. New players have some learning to do before they catch up with incumbents who in some cases have over a century of experience. Pleasing customers is not easy. They are fickle, their preferences change and, let’s face it, buying insurance is not often at the top of their priorities. But nothing worth achieving is ever easy.

So, insurtech's a thing, now what?

Sadly, there aren't 1,200 success stories yet from the 1,200 insurtech startups that SMA is tracking. And the success stories that we do hear... well, it seems that, commercially, they don't look so successful on paper yet. And above all - the insurance landscape still looks remarkably the same as it did a decade ago.

Is this a case of Emperor’s New Clothes? Is insurtech just another buzzword, a marketing ploy? For me, the answer is both yes and no: insurtech is another buzzword, it is marketing. But behind it there is a lot going on. We are living in a new world, full of technologies that can deliver amazing results.

Insurtech might well be a fuzzy term for "new stuff" and "new ways" in the industry. But the fuzziness of the term doesn't mean that the stuff and the ways aren't real or potentially valuable to the business.

Not all of the ideas will be game-changers, some of the technology will eventually be rightly condemned as solutions looking for problems... but amongst all this hopeful innovation and striving to be the next big thing, there are going to be some big successes.

The reality is that change takes a long time. To quote an oft-used phrase, this is evolution not revolution. In my mind, we should not be hoping for instant success from that one insurtech startup out of thousands that will revolutionise the industry. Instead, we should all be working on understanding insurance solutions that will really excite our customers and then use the right technology to deliver those solutions.


Content produced exclusively for Total Systems plc, specialist providers of insurance software for quote; rating; policy administration and claims

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