Just before the Italian Renaissance, guilds were formed in Florence and throughout Italy to bring together people of like occupations under a social network. Their purpose was to agree upon standards and rules, represent the group to government, improve upon their art, science or trade and provide support services to families and widows when needed.
Working together, these guilds fostered Renaissance attributes. They were patrons of the arts. They contributed to the advancement of medicine and technology. They advanced construction methods and learning in all spheres. In fact, the end of many guilds was brought about when they were merged into universities. The Renaissance created a cultural bridge from the Middle Ages or past to modern history.
However, the Renaissance didn’t just sprout up overnight. It was spurred on by a convergence of factors, the greatest of which was increased wealth. Trading in Florence had produced a new class of financier who was willing to fund artistic and scientific endeavors. Wealth created ease. Ease allowed time for thought and innovation. Innovations in practical sciences, such as mathematics and architecture, benefited from broader thinking. Fast forward to today, and the comparison to that time is striking, with a similar influx of money and a new class of insurance technology investment via insurtech.
Insurtech as a concept has grown to become, not an official organization, but a collaborative movement. It has become a bridge from the old to new being created in the insurance industry today.
Insurtech: A New Era of Innovation
Insurtech as a movement branched out from fintech (financial services focus) earlier this year following reports of significant capital entering the market for insurance startups … from insurers and MGAs to technology providers. Significant capital investment in insurtech for new insurance greenfield or startup companies is fueling massive innovation in products, services and business models and de novo options. These de novo options are a driving force underpinning the insurtech movement and why new and existing companies are looking to new business models to innovate, test ideas and bring new products and solutions to market.
See also: The Insurance Renaissance (Part 1)
A host of venture-backed startups have propelled property & casualty insurance tech investment deals to a new high in 2016, with total funding to insurance tech startups topping $1 billion in the first half of 2016, according to CB Insights. 63% of deal activity to the insurance tech market went to U.S.-based startups in the first half of 2016. Startups that distribute policies or provide software and services across the P&C insurance value chain have risen 50% compared with all of 2015. And life insurance is now also ramping up.
We saw an innovation movement in spades last week at the much awaited InsureTech Connect Conference in Las Vegas, which brought together more than 1,500 entrepreneurs, technologists, venture capitalists, insurance executives and startups. The energy, engagement and enthusiasm were infectious. It had the feeling of the “dot com” era… but with more substance. This gathering sent a clear message to the insurance industry, that we have rapidly entered a new era that is more profound and important… a renaissance. It has placed the importance of innovation and technology on a stage and signaled that, from here forward, insurance must and will be innovating. But like the forming of guilds, insurtech demands cooperation and conversation.
InsurTech and Insurance Renaissance
Just like the original Renaissance, today’s Insurance Renaissance is spurred by the converging factors of people, technology and market boundaries. Insurtech is powered by all three. Within insurance, this new Renaissance represents a real shift with significant business implications beyond legacy modernization. It represents a whole realm of new opportunities via greenfields, startups and incubators to cover a fast-changing market landscape.
In our view, based on our Future Trends – A Seismic Shift Underway thought leadership report in January 2016, and picked up by many in the insurtech movement, there are three main areas of impact:
- People – Expectations, products and business models that were built around the silent and baby boomer generations, do not meet the millennial and Gen Z expectations or needs. More importantly, Gen X is the “swing group” tipping with millennials and Gen Z. These changes in people’s lives drive changes in their expectations and their risk profiles/needs, reflected in our coming primary research on customer expectations for individuals and small business owners.
- Technology – How often do you use your smartphone in your daily life for researching, buying, servicing and convenience? Think Amazon, Uber, news and music. These new expectations drive businesses and institutions to use technologies and processes to develop new business models and channels, which give customers the capabilities they’re seeking.
- Market Boundaries – Market boundaries are being erased. New competitors and new channels are at the forefront of the insurtech movement. Consider how the largest number of startups are build around new distribution options. Then think about how existing and new businesses from Tesla, Ford and Trov are looking to offer insurance as part of an auto purchase. These new business models and capabilities will drive additional changes in people’s lives, leading to new needs.
Insurtech Leadership and Options
As we have tracked, observed and talked to our customers and other influencers/leaders in the industry this year, we are convinced this is not a “new fad” but a movement with substance that is just getting started. Unlike the “dot com” era, many of the insurtech participants have real capabilities, real business plans and real substance in how they can enable the industry through our renaissance to meet and exceed the expectations of our customers.
But it requires leadership, vision and active collaboration/participation. Standing on the sidelines waiting to be a fast follower or thinking you can do it yourself will likely not work this time. What is different? Chunka Mui reminded our customers at the Majesco Convergence Conference, just before InsureTech Connect, that the industry is moving at such a rapid pace that the gap between today’s technology and future technology possibilities is being filled by insurtech active participants. From here forward, tech advancement won’t slow to allow followers to catch up.
See also: The Insurance Renaissance, Part 2
It is an exciting time for the industry…a time of great change, challenges and opportunities. While insurers have different strategies and paths to their future, we are convinced that insurtech will be a big part of that future and are committed to helping shape, embrace and engage in the movement to enable the renaissance of insurance.