April is one of the best months for learning about early-stage companies and technological platforms influencing insurance. Why April? Because this month the Global Insurance Symposium is held in Des Moines, Iowa. What we find makes GIS so special is that both attendees and speakers take off the gloves, show a willingness to look beyond the status quo and discuss the state of the future. 

Guy Fraker, our Chief Innovation Officer, will be speaking on a panel exploring "wearables technologies" at the GIS and we want to use that subject to highlight the importance of incumbent insurance organizations taking a broader view when selecting market intelligence platforms. Such platforms can help a company to assess the vast array of innovation opportunities that continue to emerge.

Insurers have a choice when it comes to innovation-related research and intelligence, which generally is:

1. 100 yards wide and ankle deep.
2. A mile wide and one inch deep.
3. A mile wide and a mile deep. 

Which of these options is most likely to yield insights that lead to the exponential break-through opportunity?

Let’s say for the sake of argument that the broadest actionable insights are going to come from Option C. A corresponding assumption, though, might be that this choice represents too much information and would require one or more analysts and months of work to manage the information and yield those insights.

Today, however, such an assumption would be inaccurate given that a qualified and tested A.I. platform can accelerate the analysis. Option C therefore does not require any more effort or resources to take advantage of its depth than Options A and B.

Another consideration is whether a user is served by a market intelligence platform that stays within the boundaries of conventional wisdom, restating the same information one can find through countless sources, or better served by one that pushes deeper. 

In the options listed above, the phrase “a mile wide” refers to the practice of taking a wider horizontal view of innovation. In contrast, Option A, "100 yards wide," reflects an analysis that is slightly more focused and makes some additional effort to discover insights.

Innovation does require questioning the status quo, including the very definitions of labels like "wearables technology." Now, let’s move beyond theory and conjecture, in favor of actual data points.

In July 2017, CB Insights, an often-cited source of innovation research, published an analysis of wearable technologies that listed 149 funding deals from 2016 totaling $1.8 billion. In its analysis, the article highlights how funding took a dramatic decline in 2017 to $628 million.

Another market information source, Coverager, includes 14 "enablers" in the category of wearables. The table of wearables tech lacks any explanation or context beyond early stage company identification.

What is missing from both platforms? Neither firm seems to challenge the most basic question: What is a wearable? Is a wearable device one that measures fitness activity and may even monitor vital signs? That would certainly fit a conventional definition. 

Insurance Thought Leadership’s Innovator’s Edge platform takes a broader view. According to Innovator’s Edge, the conventional definition of wearable technology includes 358 early-stage firms that received $2.7 billion in funding in 2017. However, these companies are just the tip of the iceberg.

Innovator’s Edge also tracks 528 wearable medical device innovators from 62 countries that received $16.7 billion in funding last year. Consider, for example, Retina Implant out of Germany that has created an electronic retinal implant to gradually restore sight to specific cases of blindness. Is this not a wearable?

We can also look at nano-medicine companies such as Liquidia Technologies from North Carolina. Liquidia is developing particle based vaccines that can attack a variety of viruses residing in the body. Is this not a wearable?

More importantly, in terms of identifying early stage firms with the potential for driving down chronic health care claims, might this be a wearable firm worth knowing about? Possibly, but it would not likely be found in these other platforms.

Early-stage firms in the wearable market also come in the form of medical device startups—many of them targeting improved health care diagnostics and treatment protocols—which received $9.3 billion in funding by year end 2017. This category also includes firms such as BoneSupport, which has created an injectable material to help fractures heal faster, serve patients with chronic bone fragility, along with many other applications. Located in Switzerland, it is in the final stages of an IPO, having been backed by a total funding exceeding $100 million. 

The chart below is an example of Option C: A mile wide and a mile deep. By the way, just the 3 companies mentioned above received $220.3 million in funding last year.

In conclusion, the technological capabilities being brought forth by billions of dollars and many of the brightest minds don’t neatly fit as a square peg in a square hole categorization.

Relying on a superficial analysis of innovation—which intuitively sounds agreeable because the information is neither provocative, nor wakes one up in the middle of the night—is very tempting and easily digestible, but please don’t allow yourself to fall into that trap. Picking an intelligence source that doesn’t take a wider view limits your options without your permission.

Those insurance industry executives who understand innovation growth can be measured in multiples and not percentages also display a willingness to venture beyond their comfort zones to discover real innovation opportunity. This will be one of many topics discussed at the GIS conference on April 25-26, and we hope to see you there.

Guy Fraker
Chief Innovation Officer

Paul Winston
Chief Commercial Officer

P.S. In addition to in-person events, we are pleased to be participating in several upcoming webinars each of which is aimed at helping insurance organizations improve their understanding of the opportunities from innovation:

May 3: “Insurtech and Insurance in the Age of Innovation” Presented in partnership with Johnson Lambert, this webinar will focus on how and where to start an innovation program, defining what innovation means and who should be part of the team within an organization to have the best chance of success.

May 9: “A Systematic Approach to Successful Innovation” This webinar from the Insurance Information Institute and Innovator’s Edge will introduce attendees to a systematic process for insurance innovation that has been successful at driving meaningful ROI at some of the world’s largest insurers and reinsurers. This webinar is the first of a two-part program that will be followed by a live interactive workshop in Chicago to help attendees focus their efforts and identify key opportunities. Register to attend both.

May 16: “Insurance Innovation Mythbusting” This webinar, part of the National Association of Mutual Insurance Companies’ Insurtech and Innovation Webinar Series, will address the myths and realities of innovation, especially for insurance companies that question whether it is possible for a smaller organization to succeed at this and are uncertain how to begin. 

We encourage you to consider attending these events to further your understanding of what innovation means for insurance organizations and to more confidently drive innovation results. You can also track our upcoming webinars here: http://info.innovatorsedge.io/webinars

It used to be common to say that “technology is marching forward, improving business and society.” But today, it would be more accurate to say that technology is sprinting forward – with progress at breakneck speed and breakthroughs happening in multiple fields on a regular basis. There are so many technologies – some new, some just emerging – that is it virtually impossible to track the progress of all of them, let alone explore all their implications. This may put insurers in an uncomfortable position. Insurance is an industry based on historical data and long-term predictions. However, technologies are now inundating the world with real-time data and a change-pace so accelerated that it is difficult to make predictions. Fortunately, SMA’s new research report, The Emerging Tech Landscape: 10 Mega-Trends for 2018 and Beyond, assists by taking a big-picture view of the key developments in the tech world.

To paraphrase George Orwell’s quote from Animal Farm, “All technologies are equal, but some technologies are more equal than others.” Every technology has a role to play in the business and personal spheres. Mature technologies such as telephony and email still matter. More recent technologies like mobile and social media have become mandatory, foundational technologies and have been instrumental in transforming the world. Emerging technologies such as autonomous vehicles, the Internet of Things (IoT), wearables and many others are poised to anchor the next wave of global transformation – affecting the way we live, work and play. It is these emerging technologies that require the rapt attention from insurers now. The earlier technologies are still very important, but insurers have already built those into their business and have had lots of experience with them. But the emerging technologies now have more potential to fundamentally change the insurance industry than anything else at any other time in history. The risk landscape will change. Many new options are becoming available that will change internal operations. Customer expectations are changing, and new customer segments are coming into view.

See also: Key Insurtech Trends to Watch  

Some of the mega-trends that insurers should be monitoring and considering in terms of strategy implications are:

• 5G and AI Form the Foundation: 5G communications networks and artificial intelligence will form the key foundations for the digital connected world in the next decade. We will need to move lots of data very fast and automate the analysis and actions surrounding that data.
• User Interfaces Are Revolutionized: We are witnessing a dramatic expansion of how we interact with computers and the world around us in new and more natural ways. These new UI technologies affect both emerging technologies and incumbent technologies. The technologies are now rapidly maturing to mimic and capitalize on all of our senses as well as the movements of our bodies.
• Mobility is Hot: Autonomous vehicles are enjoying a great deal of press these days. But this is only one aspect of a complex picture of the evolution of mobility. The notion of mobility encompasses many innovative technologies and approaches to moving people and goods from place to place.

These are just a few of the mega-trends that are important for insurance. Expect these and others to be dominant themes over the next few years. Taken as a whole, the change wrought by emerging technologies is likely to rock the insurance industry for the next decade. That said, insurance is still insurance, and the industry has many strengths to build on. The great challenge (and opportunity) for senior management teams is to double down on traditional insurance strengths while building a highly adaptive organization to respond to changes and prosper in the new era.

See also: 5 Trends for Employers to Watch in 2018  

Click here for more information on SMA’s recent research report, The Emerging Tech Landscape: 10 Mega-Trends for 2018 and Beyond.

For decades, workplace safety has been about reactively auditing the work environment to pass a "tick box" exercise. This has not only led to high and sometimes fatal costs to businesses, but also higher expenses, more losses and a general inability to improve safety. But we are seeing changes – workplace safety puts loss prevention up front as a target, leading to lower loss ratios not just in regard to profits but more importantly for human life. First things first: Let's acknowledge that the auditor model does not work Time and time again, studies have shown that workplace safety improves when you let business owners manage their own safety. The more involved owners, managers and the workers themselves are in monitoring safety measures, the higher the chances of success. In fact, empirical evidence shows that safety incidents are one-seventh as likely to happen with engaged worker-centric approaches. Conversely when third party auditors are involved, more often than not companies just put up an appearance of compliance to get through the audit. The results are lose-lose, disengaged workers, expensive auditors and no inherent increase in safety. See also: Seriously? Artificial Intelligence?   The smarter the device or building, the safer the worker Today we have the tools to genuinely anticipate and prevent accidents, and one of the best tools is that thing everyone carries around these days, a mobile phone. The list of wearables that can bolster workplace safety is also growing longer every day as we progress toward an Internet of Things. With a smartphone, workers can take a picture of any hazard (for example, an electrical fault) with augmented reality, and the GPS on the phone turns the hazard into a dynamic alert as opposed to being some static and often hidden document. So, even if it is not removed immediately, as it is unlikely to be in most cases, workers can be alerted as they approach it. (Note: The experts seem to call this contextual awareness.) The smartphone is just the start; the building itself is now smarter, with sensors for temperature, smoke, moisture, electric current, humidity, noise, light measurements, etc. In the more industrial workplaces, helmets, wristbands and even gloves are being embedded with sensors, so they can send alerts to employees and their managers in real time, allowing them to take preventive measures if workers’ well-being is compromised or safety procedures are not being followed. As safety data pours in, machine learning steps in to make the most of it While augmented reality is great for short-term risk management, machine learning makes sense of all the safety data collected and helps in long-term risk management. Placing this data among financial, environmental, occupational and social data can result in a system that updates in real time and any time (and not just via third party audits) and gives users GPS coordinates, pictures and notes. For insurance companies, this combination of IoT data feeding into machine learning capability will help deliver more sophisticated risk prediction models and underwriting risk assessment tools than the industry has ever seen before. See also: Digital Playbooks for Insurers (Part 4)   There is no need to hide things from this auditor Because it is self-audit!! But what does this mean to an insurance company? First, it means the focus now moves to loss prevention and subsequently, and carriers will have to lower premiums for worker-centric safety management. The lowering in top line premium is offset by lower expenses in using safety auditors and lower claims, leading to a better underwriting profit. This is not far-fetched; we have already seen this on the personal side and on the auto side with telematics. The trick this time around is combining with other data sources and machine learning for insights, which most humans could not comprehend in a traditional underwriting scenario. I’ll leave you with a sobering fact – 4,836 fatal work injuries were recorded in the U.S. in 2015 itself. That’s 4,836 too many. It is time for insurers to lead the charge on eliminating (the right kind of eliminating) with worker-centric processes powered by augmented reality and machine learning.

Amazon started life as an online bookseller, a fact that few people today remember, as the ecommerce giant has expanded into almost every vertical. The company now sells nearly every household item under the sun, and it appears that Amazon will enter the pharmacy market, as well, according to Tim Sandle at Digital Journal. Now, Amazon is setting its sights on yet another common household item: insurance. What does it mean for Amazon to enter the insurance industry? How will Amazon the Insurer change the ways that property and casualty insurance customers purchase coverage? And how can insurers respond to the change on the horizon? Here, we explore both what Amazon has in mind and how the company’s inauguration as an insurance company will affect the P&C ecosystem we know today. Amazon as Insurer: What We Know So Far Amazon made headlines in late 2017 when the company was spotted recruiting insurance professionals in London, according to Chris Seekings at the Actuary. GlobalData noted that Amazon was looking at insurance markets in the U.K., Germany, France, Italy and Spain. While Amazon did not announce any specific plans related to its conversations in London, speculation about whether the company would enter the insurance market, and what disruptions would result if it did, have circulated ever since. Amazon’s plans pique concern among P&C insurers in particular because digital transformation in the insurance industry has been slow, according to a Willis Towers Watson report. 53% of P&C executives who responded to the Willis Towers Watson survey said that the insurance sector was “significantly” or “moderately” behind other sectors when it came to digitization, and only 7% thought insurance was “significantly” or “moderately” ahead. As insurance becomes more digitized, it becomes more appealing to Amazon and its online-first approach. With P&C insurers like Liberty Mutual, Safeco, Farmers and Allstate already leveraging Amazon’s Alexa voice assistant to help users shop for coverage, Amazon’s own use of the tool to sell coverage seems only a step away, Pat Speer writes at Digital Insurance. As of early 2018, a search for “Amazon Insurance” brings up a page on the company’s website with divisions for health and auto insurance — but these sections offer no products yet. Currently, Amazon’s insurance offerings are limited to Amazon Protect, the company’s warranty service covering purchases against accidental damage, breakdown or theft, according to Paul Sawers at VentureBeat. But every sign indicates the company is exploring its options for expansion. See also: Can Amazon Dominate in Insurance, Too?   If Amazon does step into the insurance world, it won’t be the first global e-commerce site to do so. China’s Alibaba recently announced a joint venture with China Taiping Insurance Holdings and five other investors to bring Alibaba into the Chinese health insurance market, according to Steve Randall at Insurance Business. What Changes When Amazon Becomes an Insurance Competitor? “Given Amazon’s market presence and their capabilities in the digital arena, if they do get into insurance, it’s likely to be disruptive,” says Seth Rachlin, EVP and insurance lead at Capgemini. This is true even if, as Rachlin speculates, Amazon might begin its foray into insurance by offering add-on coverage related to the purchase of another product or offering, instead of offering coverage as a stand-alone product. The company is also rumored to be investing approximately $15 million in Acko, an Indian company that provides online-only insurance products, according to Business Insider’s Maria Terekhova. Amazon may even be looking at health insurance offerings, according to Stephen Goldstein at Daily Fintech. In late January 2018, Amazon, Berkshire Hathaway and JPMorgan Chase announced a plan to partner on ways to address their own employees’ healthcare, according to BusinessWire. Amazon as an Underwriter, Too? Another question is whether Amazon will compete as an insurer by actually covering risks, or if the company will perpetuate its current strategy. “Amazon does not create the products that it sells,” notes Daily Fintech contributor Bernard Lunn. “They own the ‘last click’ to the customer’s wallet and can partner to get any product they want.” Amazon Protect is just one example, according to Lunn: The actual coverage is underwritten by the Warranty Group, not by Amazon itself. Amazon’s partnership with several P&C insurers to share quotes via Alexa is another example: Amazon users can avail themselves of insurance — and Amazon can profit — without Amazon underwriting a single policy. In this world, cooperation may beat competition for legacy insurers. Amazon’s Sales and Marketing Channels What coverage Amazon decides to sell is one question. How they sell it is another. Alexa, plus Amazon’s seamless cross-platform digital marketplace, give the company a clear advantage when it comes to selling insurance in a digital world. Or do they? If Amazon plans to rely on its digital presence, it may be failing to contend with its biggest obstacle: customers. According to GlobalData analyst Patricia Davies, while Amazon is known for strong customer communication, this skill doesn’t translate to the kind of trust insurance purchasers want in a relationship. GlobalData’s 2017 General Insurance Survey found that only 18% of respondents trusted Amazon with their motor or home insurance. To overcome these obstacles, Amazon will need to improve its “face to face” approach to customers. Whether the company would do so through conventional agents or other means remains fertile ground for speculation, but Amazon may have one advantage: multiple contact points with customers. “Organizations such as banks have just had more contact with customers [than insurers], and that’s given them a head start” on digitization, Willis Towers Watson’s EMEA life insurance M&A leader Fergal O’Shea says. “The quality and frequency of the information exchange between insurers and customers, who may simply be renewing a policy once a year, just isn’t the same.” See also: Will Amazon Disrupt Insurance?   Amazon, by contrast, not only has significantly more contact with most of its customers, but the company also prioritizes data mining and optimization. One major concern the rumored Acko deal raises for legacy insurers, according to Terekhova, is the fact that Amazon can easily personalize its insurance offerings through the “troves of data” the company collects and maintains on its customers. And Amazon’s share of the Indian ecommerce market is growing, pulling even with Indian ecommerce site Flipkart in early 2017, Jonathan Camhi reports at Business Insider. In other words, Amazon has the information it needs to build customer trust — and shows it’s committed to learning how to use it. What’s the Next Step for Insurers? Whether Amazon decides to sell P&C insurance or simply aggregate other insurers’ offerings for easier customer perusal, insurance companies seeking to respond would do well to move to the forefront of customer-focused digitization. Doing so offers three major benefits:

• Better communication in a digital world. Customers don’t always buy insurance online, but they increasingly prefer it for comparing options and gathering information. A system that doesn’t make that easy pushes people to shop elsewhere.
• Better customers personalization through data. Amazon has long been the 500-pound gorilla in the room when it comes to collecting and using customer data. But legacy insurers have the benefit of existing customer relationships, which nuanced handling of data can make it easier to maintain — and to upsell.
• More nimble response to Amazon’s next move. A strong omni-channel platform improves an insurer’s competitiveness with other best-in-class omni-channel insurers. Whether Amazon decides to sell its own insurance or simply to aggregate data from participating insurers, an outstanding digital presence opens up options for the company that maintains it.

Fortunately, software as a service (SaaS) providers who specialize in working with P&C insurers have smoothed many of the major obstacles companies faced in the early days of digitization. Partnering with these providers can help a company move to a seamless omni-channel platform, improving customer relations and leveraging key data to boost sales.

Collaboration has become one of the buzzwords at innovation conferences. Not quite as prevalent as blockchain or AI - but not far behind. Unlike some of the other buzzwords, the benefits of effective collaboration can be seen quickly -- as little as a month in some cases and no more than two quarters at most. Incumbent insurers have realized that collaborating with startups is one of the fastest ways in which to bring in unique capabilities, digital skills and mindsets into the broader organization. Effective collaboration, however, is difficult - especially from the insurer's point of view. At the start, the benefit of the collaboration is in the future – but the costs and effort are upfront (the startup gets an immediate benefit – validation of a large customer). Generating and maintaining organizational energy for collaborations is a key element of the innovation manager’s job. I have put together a 10-point checklist (from the perspective of the corporate innovation manager) to improve the chances of success: 1. Buy in: As the innovation manager, you have to ensure that you have the buy-in of the C-suite. Buy-in means paying more than lip service to the company's innovation agenda. It means a willingness to put your reputation on the line and personally promote startup partnerships. Lack of C-level buy-in is the quickest way to a doomed collaboration! Top Tip — Struggling to get buy-in? Remind your execs that 75% of the S&P 500 will turn over in the next 15 years. Do they want to innovate or die? 2. Money: Fight for a ring-fenced collaboration budget. Normally, the business unit will not be willing to pay for the pilot from its budget. It will always have a better use for its cash than paying for an unproven benefit. Thus, having a dedicated pilot fund significantly increases the chances of effective collaboration. Being the payer also allows you to demand (gently) effort and seriousness from the business unit implementing the pilot. Top Tip — Think through the handover of the pilot to the business. At what point will the business unit take complete ownership of the project? 3. Legal: Don't wait till after you have identified a startup partner to speak to your legal team. Involve them with the process from the start. Get them to draft a standard collaboration agreement. Allow them to be comfortable with terms relating to customer data, IP protection etc. The more lead time you can provide the better. Top Tip — Agree on the amount of liability insurance your legal team wants. Better yet, budget for it so that you can purchase it on behalf of your startup partners. See also: How to Assess Bootstrapped Startups 4. Compliance: Another team that should be involved from the start. At a minimum, get to know the documents your compliance team needs and get your startup partner to give those to you early on in the process. Waiting for compliance clearance is a real buzz and momentum killer. Ideally, work with your compliance team to create a sandbox (less demanding compliance) for your partnerships. Top Tip — Read your company's compliance manual. It helps to be an expert in your internal processes! Processes like internal risk clearance should be done well before the negotiations reach the contracting stage. 5. Procurement: Beware the Request for Proposal rules. These can serve as the ultimate roadblock if not managed ahead of time (you do not want your hand forced to request for minimum three quotes or ask for a three-year financial history for what should be an 'innovative' project). By design, procurement is a risk-mitigation strategy and is not meant to handle startups or innovation. Still, you have to work within the confines of the procurement process – it’s best to be on first-name terms with the head of procurement. Top Tip — Keep your pilot budget below the minimum that triggers a mandatory RFP. 6. Problem statements: As the cliché goes - fall in love with the problem, not the solution. Always start with the problem the business needs to solve and don't fall into the trap of chasing the latest shiny technology. Crafting good problem statements is at the heart of good collaboration. In contrast, technology-first partnerships will rarely capture mind share long enough to be successful. Make sure the problem statement has been approved by the business head; this includes agreeing on the outcomes you are looking to achieve and the metrics that your business sponsor can use to track the success of the project and to link them to her KPIs. Top Tip — Think through the following points to generate actionable problem statements: (a) One-line overview (b) How do things operate currently? Highlight the pain points. (c) How much pain does it cause (in $ value where possible)? (d) Who are the people/groups of people affected by the problem? (e) What are the barriers to improving the situation? (f) What are the outcomes you would like to see? – the best problem statements stay away from technological buzzwords​​​​​​​​​​​​​​. 7. Evangelists: Successful collaboration requires support from many individuals across all levels of the organization. Research has repeatedly shown that cultural and political reasons derail partnerships far more than product-related challenges. You need to make sure that your business colleagues are invested in making the collaboration work. They must have an upside – that is, the possibility of personal and financial growth. Financial growth is easy – include a bonus for successful collaboration. However, personal growth is the real catalyst and will pay dividends beyond the initial collaboration. Top Tip — Use the entire gamut of personal growth options — from profiling your evangelists in your company newsletter to giving them visibility to both your company and the startup’s executive teams. 8. Security and IT: You've done the hard work of securing a budget, agreeing on a problem statement and recruiting your evangelists and then you find that the APIs required for your project are not ready. You lose credibility internally and externally. You need to know what your IT org can and cannot do and the architectural requirements your organization mandates. Top Tip — Make sure you have reviewed documentation on all the APIs your organization provides. See also: Digital Playbooks for Insurers (Part 2)   9. Sourcing Networks: There are a host of open innovation platforms that you can use. Most come with thousands of startups registered on them (a classic vanity metric). You need quality over quantity and should focus on startups that have raised at least one round of institutional funding. Remember, you are not in the business of incubating startups - you need companies that are able to deliver a product-market fit on Day 1. Top Tip — Use tools like Crunchbase and Tracxn to vet startups. Look for verified funding and deployments. 10. Due diligence — DD in a collaboration context is a tricky subject. You are not an investor, yet you need to answer some basic questions. Ultimately, your reputation depends on the quality of the startup, so you need to complete a stripped-down DD that includes gathering information about recent sales, ensuring you receive customer feedback from the startup's customers and seeing an in-depth demonstration. Top Tip — Speak to at least one investor or customer as part of your DD Ultimately, successful collaboration is about survival – this is the age of the network, and success lies in building a committed and responsive ecosystem. Insurers quick to leverage the relevant startup services while defining a digital vision for themselves have a better chance of thriving for another century. Best of luck!

In personal lines insurance, independent agents constantly face increased competition in an already congested market. Many of the competitors have the technology to provide the on-demand service that customers require. In addition to direct writers and others, massive companies like Google and Amazon continue to hint about re-entry into the insurance markets. The bottom line: For independent agents to remain competitive, they can no longer solely rely on selling personal lines. Commercial lines offer agents another avenue for revenue, and it is a segment in which they can still dominate. According to the IIABA’s 21st Market Share Report, while independent agents wrote just over a third of personal line premiums, they wrote 83% of commercial lines premiums. Most business owners need a trusted adviser. When searching for an insurance agent, they want a knowledgeable resource who can work with them on the different aspects of their personal and business portfolios. If their current agents can’t handle multiple line needs, many will turn to agencies that can handle both lines of insurance. But, for agencies looking to expand their book in commercial, the same techniques used to target personal lines clients will not work. Personal lines are fairly straightforward. If you build a good relationship with a prospect, have a reputable carrier to place him with and fall within a reasonable price, you have a good chance of winning him as a client–and having him refer you to family, friends and colleagues. For commercial, you have to know the product and the customer very well. You have to understand the specific business details and the risks it faces on a much deeper level. You also can’t rely on building referral to referral. Prospecting requires much more research and initial leg work before you can start cold calling and networking. See also: Top 5 Themes in Commercial Lines   For independent agents looking to expand from B2C to B2B, here are three best practices that will help you land commercial clients. Master some, but don’t dabble in all In commercial lines, each industry has its own specific risk categories, and the needs of different companies can vary greatly from each other. For example:

• How many employees does it have?
• Does it have business disruption issues such as supply chain or weather-related factors?
• What is the employees’ safety risk and how will this affect workers compensation?

For many agencies, especially those just entering the market, focusing on one or two industries and selling a specific type of product such as BOP or workers' compensation, can be an effective approach. This allows you to become an expert in that particular area and build the right set of carriers that specialize in that focus, a key draw for prospects. It also allows you to narrow your focus and get ingrained in that community. For example, if you wanted to specialize in restaurants, you could join the National Restaurant Association and subscribe to the top three restaurant trade publications. This would allow you to learn the pain points of restaurateurs on a macro and micro level. You could then create a compelling presentation for the prospect’s business owner or CFO on how your agency could benefit her in ways her current provider cannot. Closing that first lead will help you get referred to other restaurant owners, and soon you can build a client portfolio that will make you the go to restaurant insurance agent. Promote your credibility — with the right technology Technology is important in commercial lines – but since you’re dealing with clients one-on-one in a customized way, certain technologies are not as critical as they might be for selling personal lines. But that doesn't mean successful agents can rely on old-school tactics like pamphlets, mail and fax to attract clients. Companies are looking for agencies that exude expertise and credibility in their fields. Sending an email newsletter to commercial clients can keep them apprised of the latest developments and emerging risks in their industry as well as keep you top of mind. You should have an interactive, comprehensive website that is easy to navigate, details your expertise working in a specific industry and makes it easy for the commercial client to contact you. Other digital materials such as an agency blog and accounts on key social platforms like LinkedIn and Twitter dedicated to your business expertise will also demonstrate your knowledge in your focus area. The right digital capabilities can also aid you in prospecting. If your website illustrates your expertise in insuring a specific business rather than just commercial insurance, in general, it will attract prospects searching for insurance in their specific industry. For example, a restaurant owner will most likely search for insurance for restaurants, not business insurance. Email marketing newsletters and risk management webinars can also further demonstrate your expertise in working with businesses and provide an opportunity to build relationships with prospects by providing them with insightful information that go beyond sales materials. See also: Commercial Lines: Best Is Yet to Come   Let clients dictate the terms and method of communication All prospect relationships need to be nurtured to keep the lead engaged. You should be ready and able to communicate through whatever channels clients prefer. This may be traditional email or phone calls. But the prospect might need you to present your information to a group of leaders, and you have to be able and willing to travel to wherever that prospect may be. Or, the owner might want to quickly be able to text you a question, and you will have to have some plan in place for handling those requests. Companies might be using more modern video conferencing systems such as Skype or other video platforms. When pursuing a prospect, you should ensure you know the company’s preferred method of communication and make sure you have the capabilities to communicate with them on that platform. As the insurance market continues to evolve, insurance agents who focus on a single line of business will struggle to keep up with the competition. Independent agents still dominate the commercial lines market, and branching out can provide new sources of revenue. Targeting companies is not the same as individuals – and agents will have to thoroughly understand their focus industry and products. But if they can demonstrate their expertise in a particular field, independent agents can grow highly successful commercial lines books of business.

Much has been said about the challenges facing the reinsurance industry, to the point where the industry and a few of its major players have been characterized as being in a potentially terminal decline. However, to focus on recent results is to overlook fundamental changes in the nature of risk in the 21st century that could benefit the world’s major reinsurers, with opportunities unlike any seen before in the modern history of reinsurance. A difficult financial backdrop for reinsurance in 2017 Financial results for major reinsurers in 2017 saw substantial contractions from prior years, driven by large catastrophe losses from hurricanes and California wildfires. These results have been followed by cost reduction in the reinsurance industry, which has elicited surprise in two conflicting ways. For some, the surprise was that the cost-reduction efforts could affect reinsurance, given that such exercises were more common for their cedent primary carrier clients. For others, the surprise was that it had taken so long for a focus on cost to come to the reinsurance market. Concerns about the future financial performance of the reinsurance industry are held at the very highest levels of leadership among major reinsurers. In response to questions about the company’s 2017 performance, Swiss Re CEO Christian Mumenthaler commented on the state of the property catastrophe market that “we need to get used to a world where margins are much lower.” Given that property catastrophe profits have been one of the best-performing segments, not just in reinsurance,but in the entire insurance industry, according to McKinsey, this is an unwelcome development for the medium-term profitability of reinsurance firms. Bearish commentators do not blame recent poor results on an unfortunate confluence of large-scale U.S. property losses, excess capital in the reinsurance industry or a temporary soft market. Rather, global advisory firm EY points to “clear signs that reinsurers face a long-term structural phenomenon rather than a short-term fluctuation of the insurance cycle.” EY goes on to warn in a report on the reinsurance industry that there is “compelling evidence that reinsurers are inexorably moving toward a 'dead end' with their legacy business models.” The potential for reinsurance, with a longer-term lens Such pronouncements about the potential for the reinsurance industry to perish are, however, overblown. Far from the rapidly changing risk environment undercutting the role of reinsurance, changes in the nature of risk have the potential to unlock a golden age of reinsurance where reinsurance institutions could play an even more important role in the future of the global economy than ever before. Two megatrends affecting society in the 21st century could bode very well for the reinsurance industry. The shift from physical to non-physical assets on balance sheets First, the emergence of non-physical assets fundamentally alters the nature of risk, which will require major changes in the P&C insurance industry. According to Ocean Tomo, in 1975, more than 80% of the market capitalization of the S&P 500 was derived from physical assets and infrastructure. Property insurers, therefore, had a key role in insuring the most valuable assets of the business community. However, by 2015, property assets made up a relatively small share of the value of businesses, with 87% of that value being tied to intangible assets. For centuries, the P&C insurance industry was focused on the protection of property, but in the space of a generation the relative importance of physical property has declined precipitously. Risk to assets hasn’t gone away; there has just been a shift from physical to non-physical assets. See also: The Dawn of Digital Reinsurance   The shift toward digital risks as a driver of risk to a company’s income statement Second, the emergence of digital risk is fundamentally changing the potential causes of loss for businesses. When you move beyond a balance sheet perspective, where physical property has declined in importance, and look at the income statements of contemporary businesses, you also see an increasing reliance on digital technologies with substantial potential for business interruption when these technologies are disrupted. These losses are already being witnessed today with the recent NotPetya attack illustrating that many major businesses can lose hundreds of millions of dollars from a single cyber event. It is, therefore, no surprise that cyber risk has skyrocketed in importance from the #15 item on the minds of risk managers in 2013 to the #2 item on the minds of risk managers in 2018, according to a report from Allianz. What is remarkable is not just the meteoric rise in importance of cyber risk over the past five years but the fact that we are just scratching the surface of a megatrend that promises to have an even greater impact in the years to come. Changes in technology are fundamentally changing the nature of risk due to the digitization of the economy, the automation of entire industries and the explosion of Internet of the Things (IoT) devices. As the economy shifts from having 10 billion Internet of Things (IoT) devices to more than 200 billion IoT devices, sources of digital risk are set to skyrocket, along with the potential for cyber losses. The foundation for any financial risk transfer product – where is the financial loss? Estimating the financial impact of cyber risk is a difficult endeavor. A recent piece of research conducted by RAND, supported by the CyberCube unit of Symantec and the Hewlett Foundation, estimated that cybercrime today costs the global economy at least $275 billion to as much as several trillion dollars. When you layer on the emergence and deployment of new technologies, this number will only increase over time. Not only will these losses due to cyber events rise, but cyber catastrophe modeling research undertaken by CyberCube suggests that there will be a shift from attritional day-to-day losses affecting individual to firms to more and more large-scale losses affecting multiple companies simultaneously from global aggregation events. Such events were once deemed somewhat theoretical, but the last 18 months have revealed a series of cyber aggregation events that have shown that cyber events have the potential to lead to simultaneous losses from many companies, and we are just at the beginning of a major technological change. In many cases, the absolute level of risk for the global economy will decline. For example, with the emergence of new safety features in automated cars, the incidence of property and casualty losses from automobiles will decline. However, new sources of catastrophic risk emerge as the potential arises for mass losses from the simultaneous failure of the technology affecting thousands of companies simultaneously. CyberCube has identified more than 1,000 technology “single points of failure” that could pose sources of aggregation risk to insurers, and this number will only grow as the years go by and new cloud-connected technologies are rolled out. To draw an analogy to the property insurance market, you can expect far fewer one-off damages from one-off fires burning down a single home and far more wildfires destroying entire towns. Implications for reinsurers So what are the implications for reinsurers? 1. The foundation for any financial risk transfer product – where is the financial loss? Changes in the nature of company assets, technology and the emergence of connected digital risk are reducing absolute levels of risk to the society overall but concentrating the potential for financial losses in a smaller number of catastrophic events. This is precisely the type of risk and financial transfer that the reinsurance industry can provide. 2. Emerging cyber risk is so complex that the largest and most sophisticated reinsurers stand to gain the most from this shift in the risk landscape Given that cyber risk is not geographically constrained, the ability of smaller and less sophisticated reinsurers to participate in a large number of geographically diversified natural catastrophe treaties is diminished. The nature of cyber risk is so complex and dynamic that only reinsurers with a critical mass of expertise in connected digital risk will be able to effectively understand, monitor and model cyber risk. There will be more differentiated insight in cyber risk than in natural catastrophe risk. 3. Investment from reinsurers is needed to understand cyber risk today, in advance of catastrophe events that could create tremendous financial opportunities for reinsurers in the future It is a cliché to say that it is just a matter of “if not when” for cyber attacks on individual companies. What is becoming increasingly apparent is that the same can be said for catastrophic cyber aggregation events that cause material damage to many companies simultaneously. When this happens, insurance history suggests that demand for coverage will increase, capital will flee the market and prices will harden. The reinsurance market for cyber as a peril might be small today, but reinsurers that have taken the time to invest in their own capabilities ahead of these events, with informed capital to deploy when market demand spikes, will benefit tremendously. See also: Mamas, Tell Your Kids to Sell Reinsurance   Conclusion: Terminal decline or golden age? The nature of risk is fundamentally changing, which means the nature of financial risk transfer also must change. 2017 may have been a bad year for the financial performance of the reinsurance industry, but this is a market where time horizons need to be considered over many decades and certainly not over the results from one financial year alone. Far from the reinsurance industry being in a potentially terminal decline, changes in the nature of risk in the 21st century, stand to benefit the most sophisticated players in the reinsurance industry if they can take advantage of digital trends and understand new risk concentrations. Reinsurers that invest in understanding the nature of cyber risk, and the sources of catastrophic losses, not only stand to benefit in outsized ways relative to other insurers, but they also stand to help society reap the tremendous rewards of new technology by mutualizing financial risk when technology inevitably goes wrong. The reinsurance industry as a whole is neither in terminal decline nor at the beginning of a new golden age. It is the action of individual reinsurance companies, and their efforts to understand, quantify and model digital risk that forms the basis of whether they will thrive or falter in this emerging digital age.

Despite continuing efforts to cut costs, U.S. commercial lines loss adjusted expense and underwriting expense ratios have not improved over the last 20 years. Over two-fifths of every dollar of U.S. commercial lines premium collected is used not to pay claims but to fund loss adjustment, commissions and brokerage and underwriting expenses (source: S&P Global Market Intelligence data and PwC Analysis). New regulatory burdens and requirements for better service, among other factors, have negated any efficiency gains from technology investments. However, we expect that today’s market environment is forcing a shift, and that a more strategic approach to cost management will become an imperative for growth in 2018 and beyond. It’s becoming harder and harder to sustain the same returns as in the past. Insurers are facing pressure on both sides of the balance sheet. Coming off multiple years of soft market pricing and a string of catastrophes in 2017, underwriting margins are being squeezed and reserves depleted. Looking forward, any market hardening is likely to be moderate and short-lived, given advancements in data and analytics and flow of capital toward industry opportunities. At the same time, investment returns are at historic lows. Accordingly, a fresh look at costs is an obvious path to improve returns. Technology has now advanced enough that significant productivity gains can result from digitizing and leveraging information assets. Over the past year, enabling technologies such as cloud, artificial intelligence and robotics have continued to mature. They are no longer “innovative,” but tested and proven mechanisms. These technologies help attack the expense problem much more efficiently and at a lower cost than five years ago, and, with the help of insurtech firms that offer point solutions, they no longer depend on core transformation and in-house development to yield results. With companies already feeling pressure to shift cost curves, tax reform further increases the impetus and opportunity to think differently about operating models. In particular, companies will have to make key decisions on existing and new businesses, reinsurance arrangements, investment opportunities, products and services, systems and technology and employee compensation considering the tax implications. For example, companies will want to evaluate operations in U.S. states and non-domestic jurisdictions to determine strategy for where employees are located, where revenue is accrued, and from where items are sourced. Multinational insurance companies may have significantly more earnings onshore given the U.S. mandatory tax on foreign earnings, and a lower corporate tax rate will make domestic investment more attractive. Additionally, with more cash onshore and the lower tax rate, companies may want to look at how acquisitions can advance their strategies. Tax reform also may drive changes to structure, valuation and timing of acquisitions, dispositions, and alliances. Given the level of change, tax implications can both spur action and uncover cost-saving opportunities. Challenges vary by segment At the highest level, the commercial lines market consists of 1) small to mid-sized companies needing standard products (e.g., property, auto, general liability, workers’ compensation), 2) large companies with more complex needs and program structures (e.g., self-insured retentions, captives, reinsurance) and 3) companies with high-hazard/specialty risks with customized product needs. Commercial insurers face different challenges to remain profitable and grow in each of these segments, and expense management tactics vary accordingly. In the personal lines market, an expense ratio advantage typically provides a sustainable competitive advantage (i.e., those with the lowest expense ratios grow the fastest). The small to mid-sized standard market is increasingly going the way of personal lines. A heightened demand for a streamlined agent and customer experience coupled with a larger focus on price means insurers have to focus on efficiency and simplification to remain competitive. Those that do this well will more easily steal share. On the other end of the spectrum, clients with large or high-hazard/specialized risks continue to demand high-touch service and customized underwriting and claims solutions to meet their needs. Insurers in these markets must balance efficiency improvements to reduce cost to serve against the need to deliver the “last mile of service” to a specific location, whether a handshake at New York headquarters or a truckload of generators and plywood to keep operations going after a storm in Oklahoma. Larger clients also may demand higher touch on financial analysis to support their own reserving and reinsurance needs. See also: Are You Fit Enough for Growth?   Insurers in multiple segments must consider the intricacies of each business segment while leveraging scale and national presence across all of them. This makes cost optimization more complex than it first appears. To add to the complexity, the demand for simplicity and efficiency is increasingly moving up-market while the demand for customized service is moving down-market, blurring the lines between segment needs. Strategic Cost Management Tactics Cost management is not a new phenomenon. Our research shows that 75% of insurers have undertaken cost-cutting programs in the last three years and that 61% of insurance CEOs plan to launch cost-reduction initiatives this year alone. However, while many insurers have cost management on their agendas, few are achieving sustainable cost savings. While most have tackled the basics when it comes to process design and efficiency, business complexity (often driven by a desire to be infinitely flexible and meet a wide range of needs) and fragmented technology environments can get in the way. Furthermore, when cost-cutting efforts do not tackle strategic and structural issues or address required cultural changes within the company, costs tend to creep back up as focus fades. What should commercial lines insurers do? 1. Don’t try to shrink your way to greatness. Driving toward the lowest possible expense ratio is not the key to long-term success. Underwriting is still king and likely always will be; you cannot sacrifice your underwriting prowess in favor of stringent cost-reduction tactics or policies. Acquiring and developing strong underwriting talent and having appropriate data, analytics and governance to guide decision-making are fundamental to strong performance. Investments in these areas may be necessary to keep pace: If they stall for the sake of cost management, there could be bigger profitability challenges down the road. For example, no-touch underwriting and processing in the small to middle market space requires appropriate a) data quality, accessibility and monitoring mechanisms to govern what is on the books and b) speed-to-market (in terms of decision-making and system change processes) to adjust to market changes. In the large commercial and specialty segments, careful operating model design is essential to align proper expertise to relevant risks at the right time. That said, costs can be shifted from fixed to variable to a) align more closely with the size of the business and b) provide necessary market agility. Partnerships with MGAs can enable quick stand-up of new underwriting operations (with appropriate underwriting expertise) without having to build them from the ground up. This also allows for a quick exit if the new endeavor isn’t profitable. In addition, shifting low-value work to lower-cost resources (e.g., from underwriting experts to processing centers) makes it easier to hire and train for these activities when scaling up for growth in a given area or repurposing FTEs to other areas when exiting. 2. Manage costs for the enterprise, not one function Insurers should approach cost management at the enterprise level, setting targets for the organization and challenging the business units and functions to work together to identify opportunities to hit them. When tackled function by function, cuts may be made at the expense of other functions, thereby cutting capabilities others need to perform well (e.g., eliminating required fields at the first notice of loss may affect the granularity and timeliness of underwriting analysis), or simply shifting costs from one area to another (e.g., eliminating information gathering in the underwriting process means processing will have to do it, likely resulting in inefficient back-and-forth when gathering information). Additionally, changes in one area may be justified by cost savings in others (e.g., removing a coverage option simplifies both the billing and claims handling). Lastly, success in one area has potential benefit elsewhere in the organization (e.g., RPA in processing also could apply to claims). Fostering collaboration across the enterprise (and even incorporating feedback from distributors and customers) can uncover new insights and opportunities, as well as promote the cultural shift that sustains a cost-focused mindset. 3. Cut features and services, not just costs Choosing where not to invest can be difficult; defining a strategic “way-to-play” is the first step to understand which products, services, channels and capabilities can be eliminated to better manage costs. For example, continuing to support legacy products and features (e.g., pay plans) can add significant complexity to an insurer’s operating environment, which adds cost and can stall efforts to upgrade platforms or add new features for future products. Choosing to move existing customers to the latest products and features (or even exit certain markets) can be difficult, but it can be the right move to unlock growth, profitability and cost savings across the rest of the portfolio. Customer segmentation also can help insurers determine where to invest and what to cut. Not all customers require the same level of risk analysis and customer service and identifying which segments are currently overserved can help align cost with customer value. For example, underwriting reviews could be triggered by changes in risk exposure rather than annual or once-every-three year reviews. Loss control visits could vary by industry, size and length of relationship. Distributor service levels (e.g., turnaround times, quote negotiations) could be tailored to the value of the relationship. Taking a closer look at customer and distributor needs and value can help cut costs without sacrificing revenue or profitability. 4. Put new technologies front and center When it comes to cost cutting, the traditional levers have not changed. Commissions, headcount and IT remain significant areas of spending for insurance companies. However, there are innovative ways to reduce these costs. Offering certain value-added services to agents (e.g., taking on servicing) can indirectly bring down commission expense, artificial intelligence and robotics offer new ways to reduce headcount and the cloud lowers IT costs and enables a more variable “pay-as-you-go” model. See also: 7 Steps for Inventing the Future   Too often, cost management efforts that focus on immediate savings put new technologies in a “parking lot,” treating them as a future-state opportunity that will take significant up-front investment for questionable down-the-road benefits. However, immediate benefits are now readily available. Many insurers are partnering with insurtech companies to quickly enhance their capabilities and realize long-term savings. Moreover, new technological capabilities are leading insurers to rethink their broader business models. Implications

• Although a cost advantage has not driven commercial lines performance to date, times have changed.
• In the short term, cutting costs will help insurers fund strategic initiatives that better position them for growth and profitability in their target markets.
• In the mid- to long term, insurers with a sustainable cost advantage empowered by efficient operations and a flexible cost structure will be able to compete more aggressively on both price and service and have the flexibility to allocate capital to the most promising market opportunities.

This report was written by Jamie Yoder, Francois Ramette, Bruce Brodie, Joseph Calandro, Jr., Katie Klutts and Matt Shuman. You can download the PwC report here.

If the buzz of the P&C insurance conference circuit is to be believed, whizbang new technology and “big data” analytics provide the answers to every problem the industry has ever experienced. More precise risk projections, streamlined customer service functions, 24/7 automated support, claims investigation – they’re all getting better with new technology, and the industry is investing heavily to keep pace. However, while there is no question that carriers need to build better technology and secure better data, neither technology nor data alone will fundamentally improve the customer experience. According to findings in the 2018 U.S. Property Claims Satisfaction Study from J.D. Power, a positive customer experience isn’t driven by which carrier has the slickest photo app, uses drones to survey properties or has streamlined the first notice of loss (FNOL) process to be highly efficient. Instead, customers want to feel their carrier has their back in a time of stress or crisis. Customers simply want to understand that everything is going to be okay; they want to know how the claim process will run; and they want someone to care enough to keep them informed about their loss. Technology can fill some of these customer needs, but before the technology or any type of enhanced processes can be effective, someone must set the right expectations. See also: 3-Step Approach to Big Data Analytics  Consider the Insurance Information Institute’s evaluation of homeowner claims from 2011 to 2015, which indicates that one in 15 insured homes has a claim each year. Excluding catastrophes, the claim frequency for homeowners is quite small, which means most customers have no idea what to expect when they have a loss. Beyond their lack of claim experience, there is also the emotional toll a homeowner loss takes on a customer. The empathy and guidance provided when a customer reports a claim can truly determine whether the customer’s claim experience will be successful. Regardless of the severity or nature of the loss being reported, the carrier must set the right expectations at the beginning of the process. The customer needs to understand what will be covered, how the process will work and how long the claim process will take. Once these expectations have been set, the carrier must effectively manage the process to ensure the schedule is being met and communicate with the customer about whether the process is on track, or, if it isn’t, communicate even more frequently and in more detail. J.D. Power research on property claims has found that customers whose claim took more than 18 days to settle – which would normally create a very low customer satisfaction score – are more satisfied with the process than are those customers whose claims were settled in less than five days. The difference in satisfaction scores is based on having met customer expectations (in fact, the customer satisfaction delta in the 2018 J.D. Power study between meeting customer expectations and missing them is more than 100 points). Creating a speedy process without setting the right expectations does not improve customer satisfaction. If anything, a speedy process can hurt. Setting the right expectations leads to creating the right experience. To a claim professional, a simple fast-tracked water claim may be part of their daily routine, but for the customer, such a loss could be the worst thing that has happened to them in a long time. Without showing empathy for what the customer is going through, the process might be efficient, but it likely won’t be effective. Artificial intelligence technology can certainly help align the right adjuster to the kind of loss being reported, as well as scrub the claim for potential fraud, help align reserves or even trigger a faster payment. However, there also must be a human element to the process. For many carriers, the agent is the source for this empathy and is generally the one to set the level for customer expectations. Yet, as more claim operations move to a direct digital or customer care center, the FNOL process is shifting from the agent (who normally has a personal relationship with the customer) to a faceless website or a call center, where in many cases the process overrides the personal experience. A digital FNOL or a call center is not necessarily a bad approach. Indeed, quite a few carriers have successfully used these channels to handle claims, and digital with a call center or chat function is certainly the wave of the future. But without some personal way to create a level of empathy, the resulting lack of concern and guidance creates a customer who does not feel comfortable with what is happening. When such a customer doesn’t feel at ease, customer satisfaction suffers. Even Gen Y customers (who embrace technological transactions more readily than older customers) find a personal touch at the time of the loss to be a more satisfying experience than using a digital FNOL process. Throughout the claim process, the carrier must maintain a clear, active line of communication with the customer. Simply sending a text notifying the customer that something has changed with a claim is not a sufficient level of communication if the carrier wants to provide a high level of satisfaction. Such a text needs to be informative by letting the customer know what has changed, as well as include what effect it might have on the claim (either good or bad), and it must provide enough information so that the customer doesn't feel the need to call the agent or the carrier. See also: Strategies to Master Massively Big Data   J.D. Power’s insurance industry research affirms that carriers with the most successful claim operations understand how to balance the customer experience with the need for internal efficiencies. Using technology and data analytics as tools to reduce the level of stress and effort for their customers is a clear pathway to developing not only a strong customer experience, but also an enhanced return on investment.

The investment and activity related to the insurtech movement that began about four to five years ago show few signs of abating. If anything, the movement is moving into a new phase. But before even evaluating whether insurtech is maturing, it is important to set some definitions and boundaries. Although some consider any tech firm with insurance solutions to be “insurtech,” for our purposes, we are focusing on recent insurtech startups, typically those that have been launched in the last five years. The question posed here is whether these startups are collectively maturing and moving beyond the initial stages of a startup effort.

To answer that question, I will conduct my own point-counterpoint before drawing a conclusion. There are arguments to be made that insurtech is maturing, but a case can also be made that it is still nascent and, dare I say, immature?

See also: Where Will Unicorn of Insurtech Appear?  

Yes — Insurtech Is Maturing

A strong case can be made that insurtech is maturing. For starters, we are almost five years into the activities related to insurtech, and much experience has been gained by entrepreneurs, investors, insurers and others. In the early days, there were a small number of new ventures and limited involvement by incumbent insurance industry players. Now there are more than 1,200 insurtech startups that SMA tracks, approximately 50 (re)insurers with insurtech investment arms and many more insurers engaging in partnerships, pilots and insurtech strategies. Although there are still new insurtechs being regularly announced, the total number has stabilized in the range of 1,200 due to exits of various kinds. This stabilization, in itself, is an indication that the movement is maturing. Another important development is that winners are beginning to emerge. SMA expects many of the startups to ultimately fail or be absorbed by another entity – perhaps as many as 80% to 90% of the total. But there are currently around 50 that are gaining traction and have the funding to support growth and success in the industry. Eventually, there may be 100 to 200 prominent firms started in the last five years that become more permanent players in the industry.

No — Insurtech Is Still in Early Stages

The counter-argument is also strong – and supports the reasoning that insurtech is still not maturing. Exhibit A for this stance is that there are still only a small number of visible use cases that have made a difference in the industry. True, there are many interesting companies and projects, but there are few case studies that make you say: “Wow!” The impact on individual insurers or overall financial metrics is tiny. Another indicator of the relative immaturity is the lack of industry experience at many of the newest startups. Insurtechs that have been around for a few years have often gained more insights into the complexity of the industry and have brought industry veterans onto the team. And, of course, they have gained their own experience through engaging with insurers over this time. But many of the newer insurtechs still have a negative view of the industry and believe they will disrupt an industry that they see as a dinosaur. A final point in the counter-argument is that there are still vast sums of money set aside in funds to invest in insurtech. Insurers have billions set aside that is not yet invested. New venture funds are being formed even now. Certainly, much of these funds will be allocated to the firms that are emerging as winners, but there will be just as much going into new ventures, resulting in continued momentum over the next few years.

See also: Insurtech Presents Major Opportunities

Conclusion

I don’t want to cop out on the conclusion, but I see elements of both maturity and immaturity in the insurtech startup movement. What we may see is a bifurcation, with a subset of firms producing results, gaining significant funding and making a measurable impact on the industry. In the meantime, there will be a second (larger) group of startups still looking for that big win, that big funding round and the momentum to move them into the winner's circle.