Tag Archives: partnerships

3 Insurtech Trends Accelerating in 2019

2018 was a breakout year for insurtech companies, as the insurance industry has been long overdue for innovation and disruption. The year attracted both talent and funding to the industry. FT Partners Research announced insurtech’s quarterly financing volume for Q3 2018 totaled $1.2 billion, which is up from $749 Million in Q2 2018. The excitement increasingly surrounding insurtech indicates that 2019 promises to be an even more meaningful and game-changing time for the insurtech space.

Here are three insurtech trends you should keep an eye out for in 2019 and beyond:

Sophisticated Analytics

Any successful insurtech startup is not only passionate about transforming the current insurance model to be more cost-effective and automated but is invested in exploring the role that data analytics plays at the core of this process. Intelligent and productive data aggregation, integration and analysis are crucial in achieving this.

When it comes to data analytics, the insurance industry’s antiquated business model has much room for improvement. Insurtech is modernizing insurance as we know it by implementing advanced big data analytics to optimize insurance products and services. And investors are taking notice. Significant investments are being made in data analytics and modeling techniques to improve nearly every part of the business. By embracing data analytics, your business can gain a competitive advantage by finding “new revenue opportunities, enhancing customer service, delivering more effective marketing and improving operational efficiency.” Over time, this rise in digital innovation is sure to bring significant opportunities for a more efficient, competitive and sustainable progress for insurtech as a whole.

See also: 10 Insurtech Trends at the Crossroads  

Transparency

The vast and complex insurance industry has long awaited simplification. Insurers’ underwriting models have historically been a black box for consumers. Easy comparisons of complex data have been reserved for the experts. Transparency is critical to earning the trust of customers, especially in this digital age. People are now accustomed to online shopping, and they want procuring insurance plans to be less complicated — similar to shopping for and purchasing other high-ticket items such as homes and financial products. Consumers desire that their pricing and product information not only be transparent but comparable as “apples to apples” so they can make smarter choices. Users can access online marketplaces to compare prices and benefits of different plans side-by-side.

Partnerships between carriers and innovators

There is a deepening need for laser-focused investments and partnerships between carriers and innovators as insurtech has now matured into an everyday business. Insurance executive and insurtech dealmaker Stephen Goldstein argues that “the team is what is ultimately going to make an insurtech initiative a success,” meaning that incumbents and insurance leaders executing partnerships with insurtech companies are part of the recipe that is going to provide a positive ROI and make insurtech as an industry thrive. While 2018 was a year of exploring and experimentation for insurtech, 2019 will be the year of engaging and deepening those relationships.

At the start of 2018, insurance professionals predicted that the number of partnerships and collaborations between carriers and innovators would only gather momentum over the next year. And in June 2018, the Digital Insurer reported that partnerships remained a priority where insurtech was concerned. Insurtech companies are actively enabling new technologies that are used to provide increased efficiency and the ability to execute new tasks and analyses. These technologies are changing the industry on a fundamental level, all the while causing more incumbents to adopt these capabilities through investments or partnerships to compete effectively. The possibilities alone suggest that there will be expected growth in partnerships throughout the end of 2018 and well into 2019.

See also: Insurtech: Revolution, Evolution or Hype?  

Conclusion

2018 proved to be a massive year for insurtech, with a dramatic increase in funding from Q2 2018 to Q3 2018. There has been demand for skillfully acquired and implemented analytics, transparent experiences for consumers and mutually beneficial partnerships. All three trends are being successfully observed in 2018 and are believed to gather more momentum to lead us into 2019 and later.

How to Partner With Insurtechs

Incumbent insurers face both challenges and opportunities from concurrent forces. Dramatically changing customer expectations and low investment returns threaten both property and casualty and life insurers. Declining participation rates and indifference from millennial consumers restrict growth in life companies. Technologies such as driverless cars and sensors (Internet of Things) promise to shrink revenue in P&C.

To evolve their business and technology models, insurers are diversifying their approach to automation. Historically, in most insurance technology initiatives, the projects were fairly well-understood and had likely been implemented before. Policy, claims, and billing administration replacement efforts were typical of these automation investments.

In contrast, emerging digital approaches are uncertain and require new service models, products and capabilities. The continued rise in insurance-related technology startup funding reflects the changes that are underway in insurance IT. Insurers need advanced skills in emerging technologies. Technology startups need industry and regulatory compliance knowledge. The result has been an increasing number of partnerships between insurers and startups that go beyond a supplier-buyer relationship.

See also: Startups Take a Seat at the Table  

However, there are significant barriers to success on both the insurer and the startup sides of this equation. Insurers must address risk-averse behaviors and increase decision speed. Startups need to scale (gain customers), understand the regulatory environment and navigate opaque insurance products. Left unmanaged, partnerships do not work as well as expected.

The report titled Insurer-Startup Partnerships: Key Success Factors presents the feedback of 89 insurers and 78 insurance-focused startups from online surveys regarding best practices in partnership management. The major finding is that the two groups are generally aligned in terms of the importance of insurance innovation, but that there are key challenges related to initiative definition and accommodation of different cultural norms that must be addressed.

It will take time to work out the best ways to accomplish this new partnership model, but the barriers faced by both sides will force each to adjust. An analysis of survey results indicates that success will be improved by recognizing the following:

  • Cultural alignment and a shared vision are key.
  • Startups perceive that they are being more disruptive than they actually are.
  • Leaders of innovation initiatives must seek and implement bridging activities that join the two worlds.

See also: Engaging Employees: Key to Success  

Success will come to those insurers and startups that can make the necessary adjustments to their own preferences, cultures and working models to create meaningful partnerships.

How to Collaborate With Insurtechs

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!