Partnerships drive InsurTech growth
Written by Peter Walker
A combination of incumbent insurers wanting to update their propositions, and startups realising they require help scaling up, means the InsurTech space is ripe for partnership.
This is according to the Association of British Insurers’ assistant director and head of strategy, data and analytics Matt Cullen, who suggested that the market is finally getting closer to making technology pay.
“The key change in the last three years has been increasing sophistication, from crude defensive plays due to fears over Google or Amazon entering the market, to more innovative and forward-looking strategies,” he explained.
“But there’s a realisation that the traditional players need help, while at the same time, some of the more bullish startups which were looking at insurance have realised it’s not so easy – so there’s lots of collaboration happening to exploit synergies.”
KPMG first half Pulse of FinTech report, published late last month, showed that InsurTech companies attracted a significant amount of investment during the last six months, including $100 million+ ‘megarounds’ for Oscar and Lemonade.
“During the first half of the year, we started to see insurance companies and InsurTechs increase their focus on forging cross-sector alliances in order to embed their offerings into other value propositions,” read the report. “For example, ING and AXA recently forged an alliance aimed at connecting AXA’s insurance customers into ING’s value chain in order to create a stronger and more holistic product offering.”
Meanwhile, in June, InsurTech Yulife partnered with incumbent AIG Life to create a new insurance proposition for the UK market which incorporates wellbeing tools for businesses and consumers, delivered instantly via mobile technology.
KPMG added that it expects the use of partnerships to increase over the next 12 months, as insurance companies look to combine their services with companies that have already established customer bases. “Such alliances could be particularly effective as a means for InsurTechs to fuel expansion into other regions of the world.”
Nick Frankland, the managing director for FinTech at Legal & General Insurance, said: “We put patient capital in touch with impatient technology and spend our time helping scale up’s in markets adjacent to Legal & General.”
He added that the company’s £40 million investment in financial wellbeing employee benefits firm Salary Finance last October is a good example of that.
Elie Shuggi, head of startup delivery at Aviva, stated that they make a point of working with talented entrepreneurs, startups and the general innovation community. “These relationships allow us to identify, test and scale initiatives with the potential to create value and ultimately delight our customers.”
Cullen stated that in terms of specific improvements, the back office is the most obvious first focus, as there are efficiencies to be made and costs to be cut. “Machine learning can help automate functions and help replace legacy systems, linking up data or business units,” he added.
Front office changes need to be a bit more radical, Cullen said, as customers are unlikely to be attracted by something as simple as a new chatbot. “We haven’t had any great Facebook or Google moment, although there are interesting app partnerships for specific bits of insurance.”
Accenture research earlier this year revealed a surge in InsurTech investment, with deals increasing 39 per cent globally last year and the total value of deals up 32 per cent, to $2.3 billion. Despite uncertainty around Brexit, the UK is emerging as Europe’s InsurTech capital, with 41 deals in 2017, representing total growth of 117 per cent over the last two years.
“It’s a key time – there’s lots of work going on and investment being made, but not a lot of value created yet or hard-hitting changes evident,” commented Cullen, adding that much like with Open Banking, there are plenty of pilots, but very little actually launched.