Many insurtechs and their insurer partners are on the verge of rollouts and implementations that will produce major results.
The insurtech movement is in full swing, and one need look no further than the ITC2017 event for evidence. The event itself mirrors the trajectory of the most successful insurtechs – coming out of nowhere to achieve success virtually overnight, at least overnight in the context of the insurance industry. Any event that goes from nothing to 1,500 participants in year one and 3,800 in year two is worthy of attention. ITC and, in fact, insurtech overall has been a wild ride. And I say this as an active participant in insurtech – as a mentor, adviser, researcher and strategist to insurtechs, insurers and incumbent tech firms. So, a few observations and predictions on the movement are in order.
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- Growth. In early 2015, SMA began tracking insurtech startups. The initial list had about 50 companies and has grown rapidly to have almost 1,200 worldwide. There have been failures along the way, but there is still an upward trend in the number of startups.
- Maturity. In many of the first encounters I had with insurtech founders, there was a certain self-admitted naivete regarding the insurance industry. Many happily volunteered that they knew nothing about insurance, but had a really great idea that was going to disrupt the industry. Fast forward to today, and you find many industry veterans who have been brought on board, much learning about the industry on the part of those inexperienced with insurance and a newfound respect for the strengths of the traditional industry.
- Partnering. Everyone in the ecosystem is seeking partners – re(insurers), insurtechs, existing tech companies (what we call MatureTechs), accelerators and others. In most cases, it is not about displacement but more about enhancement through partnering.
- Experimentation. Trying new business models, new products and coverages, new distribution approaches and new operational activities is more widespread in the industry than it has ever been.
- Excitement. There is a palpable sense of excitement, energy and enthusiasm in insurtech crowds. The mix of individuals and background is more varied than ever, creating sparks of innovation everywhere.
The one aspect of insurtech that is still in early stages is the powerful, mind-bending results. There are premiums being run through insurtech players every day; insurers are achieving operations efficiencies and improving the customer experience, and they are placing new products on the market. But in the context of a massive industry, the numbers and the impact are still small.
I offer three main predictions on where insurtech is likely to head over the next few years:
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- Results/Impact. Many insurtechs and their insurer partners are on the verge of rollouts and implementations that will produce more substantial results. We are likely to see some insurtechs emerge as big winners.
- Growth Curve: SMA expects the number of insurtechs to continue to increase, as capital and appetite are still there to fuel growth. However, we will enter a phase in the next one to two years when more startups close their doors, are acquired or otherwise exit as standalone firms.
- Convergence: Insurers and insurtechs are already finding successful formulas that leverage the traditional strengths of the insurer with the new technologies, capabilities and ideas of insurtechs. This is likely to be the predominant trend over the next few years.
Insurtech is beginning to change the industry, playing a major role in insurance transformation. Many insurers have already been spurred into more aggressive strategies because of the activities in insurtech. At the ITC2017 and similar events, we are starting to glimpse the new face of the insurance industry.