Insurers have become very active in insurance accelerators and startup investment over the past year, but must embrace failure in order to innovate, according to insurance tech analyst firm Novarica.
In a follow up to its 2015 “Insurer Accelerators and VC Funds: Buying Innovation” report, Novarica found carriers have different measures of success when working with startups -- ranging from introducing staff to new technologies to forming strategic partnerships for financial return.
For companies involved in these types of relationships, adapting to startups' high-risk work culture is critical.
“Carriers must be ready to fail,” said Rob Mclsaac, SVP, research & consulting at Novarica. “They must also give startups room to operate. They do not perform well in traditional corporate environments.”
According to Novarica’s analysis, USAA’s Corporate Development Program, AXA Strategic Ventures, XL Innovate, and other major players in innovation investment are attempting to understand markets much less conservative than their own.
The benefit, according to the company, is that startups offer an outside perspective as well as access to skills and staff not found in house. In return, insurers provide clients to them and educate vendors on the complexities of operating in the industry.
The market is also not limited to bigger insurers, Novarica noted. Smaller insurers have enough capital to invest as well. Larger insurers should, however, invest in companies, “a little further down the road,” Mclsaac says, as they face the most market and political pressure.
