Insurtech may be disruptive, but it isn’t a hostile force. If anything, firms that specialize in applying tech to reinvent the insurance model should be viewed as potential partners that can help insurers remain relevant as the digital era progresses.
That’s the thrust of a recently published research paper by the thought leaders at KPMG. Authors Martin Blake, Tek Ew Chia and Murray Raisbeck assert that “In today’s technology-enabled world, the insurance industry is standing on the cusp of a major renaissance.” And further, “Innovative technologies and business models are changing the way people think about insurance — giving rise to new products, services and opportunities to enhance customer value.”
Blake and his co-authors urge mainstream insurers to form alliances with insurtech providers, recognizing that these tech-driven upstarts are providing fresh infusions of innovation along with greater efficiencies.
Of course, every insurance company is different, and its approach to partnering with insurtechs needs to conform to its particular circumstances. As the KPMG authors explain: “Insurers need to do more than understand the importance of innovation and the opportunities presented by insurtech companies — they also need to be able to leverage and integrate insurtech solutions within their own enterprises if they are going to grow and be sustainable.”
The following is their advice for determining the best way to forge such partnerships:
First mull this: Is insuretech the best approach for solving a particular business problem? Embracing insurtech simply because it’s insurtech would be counter-productive. It needs to be the right solution for the problem at hand. “Before deciding which innovations to invest in, insurance companies should define the problems they want to resolve — whether that’s reducing claims wait times, decreasing operating costs or providing more tailored insurance products,” the KPMG paper explains.
Remember, insurtechs seek to cooperate – not compete. The KPMG team makes the point that insurtechs are building their businesses by providing data and tech-driven services, not by mastering the nuances of insurance. “Most don’t have the time, patience or money to get involved in the more tiresome, regulatory and capital-intensive parts of insurance that would make their organization independently sustainable,” the authors state. “These companies partner with established insurers that have the distribution networks, capital and regulatory expertise, but lack the technical know-how to develop specific solutions.”
Consider different structures for an insurtech arrangement. There are many ways to engage an insurtech company—by issuing innovation challenges or building innovation labs for instance. Larger insurers may even opt to acquire an insurtech firm, if its business model is a good compliment to their own.
Address integration challenges. Of course, identifying requirements and insurtechs who can meet them is only part of the story. “Remember that technology is only as good as [the insurtech’s] ability to implement it effectively,” the authors remind their audience. “This might include evaluating the innovation culture of the organization in addition to any technology barriers that would affect changes from being implemented.”
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