Interest in insurtech continues to increase along with funding rounds. Many startups are scaling, bringing new opportunities and competition to established insurers.
For some, startups can help insurers bring more innovative practices in-house while providing technology for a fraction of the cost required to build up an internal team of experts. Beyond cost, startups can offer resources that insurers may not be able to find should they go it alone. Most insurers still prefer to work with incumbent technology vendors if given the option, but insurers see startups bringing capabilities to the market that are not available anywhere else. These carriers have adjusted their infrastructure (and procurement) best practices to take advantage of this growing startup ecosystem.
Insurtech Startup Growth During the Pandemic
As in 2020, the pandemic had a significant impact on the insurance industry and insurtech in 2021. While investment slowed initially in the early phases of the pandemic, it rebounded strongly in 2021, with levels during the first half of the year at approximately the investment levels of all of 2020.
Insurtech companies have matured in meeting the needs of insurance carriers and better explaining their use cases. They have also shifted the emphasis from mostly claims and distribution to include underwriting capabilities as well as becoming MGAs and full carriers.
Business Trends: Maturing Knowledge and Increased Underwriting Focus
Early in the pandemic, the focus was on projects related to digital engagement and claims automation and analytics, but, in 2021, underwriting and risk assessment solutions became more prominent. Part of this shift was due to increased maturity of the insurtech industry in general.
With more veteran insurance leaders involved in insurtech startups, these companies are better able to understand business use cases for their technology; articulate value for the insurance policy life cycle; and leverage artificial intelligence (AI) and machine learning, digital tools and native cloud capabilities for carrier use cases faster than most insurer development teams.
This maturation has led to some insurtech startups becoming MGAs or full insurance carriers. Additionally, some insurtech carrier startups have pivoted to become providers by offering their technology platform as a solution.
See also: How to Embrace Insurtech Culture
Tech Trends: AI, Data Extraction and Embedded Insurance
Insurtech startups continue to advance the use of technology solutions for important carrier use cases. AI and machine learning capabilities continue to evolve for data extraction for new business and underwriting functionality. Intelligent text ingestion (ITI) tools along with text AI solutions are improving extraction from documents in existing carrier workflows. These solutions are being implemented faster with better learning and analytics for more complex insurance products and processes.
Another trend is the increase in embedded insurance enabled by the use of APIs. The most prominent example is in automotive partnerships—insurtech startups are providing platforms to enable insurance offers and underwriting as part of the auto sales process.
These technology solutions have helped startups better meet needs across the insurance life cycle and improved their ability to quickly deliver high-impact results.
Not every insurtech startup will interest every insurer; not every insurer will decide to partner with or invest in insurtech startups. However, every insurer should take stock of what is happening in the space and learn the lessons that will make their organization stronger.
One lesson is that the insurance industry should rethink its consumer experience from every angle, including adopting new communication channels like chatbots and smart home automation, providing new services—whether drones or smartphone apps or a mobilized network of humans—for collecting claims information, leveraging deep data analysis to anticipate client needs and even redesigning insurance products to appeal to niche communities.
There are many opportunities to bring new capabilities into the organization via the startup ecosystem. Even if an insurer identifies 10 different startups that bring differentiated value, most do not have the resources or capacity to work with all of them at once. It’s important to prioritize startup integration projects and focus on the top opportunities to get the most out of the investment.
To learn more about insurtech startups, their lines of business and the parts of the insurance enterprise value chain they support, read Aite-Novarica Group’s report Insuretech Startup Index 300.