Convergence in Action in Insurtech

A pressing question for insurtechs: Will startups need to use the incumbent tech market’s capabilities, or will they build their own?

One of the most pressing questions that has arisen from the insurtech movement is this: Will insurtech startups have a need to utilize the incumbent tech market’s capabilities? In the past three years, startups have been actively partnering with other startups, insurers and tech incumbents. Partnerships, of course, come in many different flavors. The latest SMA research has revealed that startup MGAs and greenfield insurers are increasingly partnering with existing core systems providers – as clients.

The first wave of insurtech startups – most of which were focused on personal lines – tended to go it alone, developing their own core systems. Many of today’s innovative new insurers and new MGAs have focused on commercial lines and see value in the core systems that incumbent insurers and MGAs already use. Their new core systems are increasingly coming from established core systems providers.

For the insurtechs, this means that they have access to expertise and content. Both are especially helpful for insurtechs pursuing opportunities in commercial lines – which account for the vast majority of the startups that purchased new core systems last year. The earlier insurtech startups targeted personal lines and life/health ventures. Today, more startups pursue the significant opportunities in commercial business.

See also: How to Collaborate With Insurtechs  

To compete in commercial lines, these startups need to have the robust capabilities that support the various new products being brought to market. Time to value is critical, and the content (rates, rules, and forms) provided by tech incumbents’ agile core systems can increase their speed to market. In addition, the expertise of their new vendor partners can be a valuable resource to help them navigate the complexity of the commercial market.

As SMA detailed in our recent report, Core Systems Purchasing to Thrive in the Digital World: What’s Hot – And What’s Not, 12% of all new P&C core systems sold in 2017 were bought by startup MGAs and greenfield insurers. We expect them to be a stronger presence in 2018 and onward, creating substantial benefits for startup and incumbent tech providers alike and opportunities in new spaces for all forms of partnerships. As this new market wave continues, the creativity and capabilities of all will be needed to support the insurance business moving forward.

Karen Furtado

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Karen Furtado

Karen Furtado, a partner at SMA, is a recognized industry expert in the core systems space. Given her exceptional knowledge of policy administration, rating, billing and claims, insurers seek her unparalleled knowledge in mapping solutions to business requirements and IT needs.


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