Many incumbents now view insurtech as an opportunity to change internal mindsets around how to reach customers, underwrite risk and create products for new and underserved business markets. At the same time, startups have evolved as well—shifting from the once popular “disruptor” mentality a more collaborative paradigm.
That’s according to a group of panelists at Advisen’s Casualty Insurance Conference in New York. Panel experts included: Sarah Street, EVP of strategy and innovation initiatives at XL Catlin; John Heveran, SVP & CIO of commercial insurance at Liberty Mutual; and Alex Schwarzkopf, CEO and co-founder of insurtech Pillar Technologies.
“During ‘Insurtech version 1.1,’ Startups went out not knowing much, and addressed the personal insurance experience on the front end,” Street says, who is also the director of XL Catlin’s investment arm, XL Innovate. “The dialog early on was carriers had no idea what they are doing, and had to be disintermediated. That conversation has changed.”
The insurtech movement is unique in that it's the first time carriers, venture capitalists and tech entrepreneurs have worked collectively to transform insurance. Stakeholders are learning from the similar revolutions that have happened before in other industries, such as banking and retail. This is illustrated by statistics from 2017 finding that the majority of insurtech activity and investment that year was centered on collaboration.
A recent McKinsey & Company study, Street said, notes that of the $2 billion-plus spent on insurtech last year, only 10% was invested in “disruptors.” The majority was earmarked for industry newcomers looking to support the insurance value chain.
“Many startups understand insurance is a complicated business and is regulated,” she added. “That is why the MGA [managing general agency] model has gathered up much more momentum because why waste capital on such complexities?”
The disruptor to collaborator trend follows the trajectory of fintech startups in banking and startups wanting to upend retail, Heveran said.
“That’s how you get venture capital to invest, but that talk settles down after a while,” he concluded, adding that much like underwriting some risks at a loss, all startup partnerships also don’t work out. “But carriers should learn from each of those experiments.”
Panelists agree some sectors of insurance, primarily small commercial lines, are open to disruption at least on the broker side where exhausted resources don’t exactly warrant the small premiums.
Pillar technologies came to the insurance industry wanting to write their own commercial lines coverage, but quickly learned the value of partnering up, said Schwarzkopf. His startup is a construction site risk management company for general contractors leveraging connected devices to provide information to underwriters in real-time.
Much of the insurtech innovation has occurred in personal P&C lines to date, The panel agreed that commercial lines will have their time as well, but with one main difference.
“In personal lines, the focus is on distribution and automating what traditionally takes a lot of time, said Schwarzkopf. “But in commercial, you’re an augmentation tool to a team to make their jobs easier. You develop tech that can justify premiums or taking on risks.”
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