‘Insurtech’ can expand the business for Insurance sector CIOs

64% of the world's 25 largest insurance companies have already invested directly or indirectly via their venture capital arms in insurtech startups. Gartner suggests 6 ways for other organisations to capitalize on the opportunities that insurtechs provide

Most Insurers will partner with or acquire insurance technology startups to secure their competitive positions in the next two years.
 
Insurance sector CIOs need to expand their market insight concerning the innovation and disruption potential of insurance technology startups (insur-techs) to complement their digital insurance strategies, according to Gartner.
 
According to Gartner research, 64% of the world's 25 largest insurance companies have already invested directly or indirectly via their venture capital arms in insurtech startups.
 
Gartner predicts that 80% of life and property & casualty (P&C) insurers worldwide will partner with or acquire insurtechs to secure their competitive positions by the end of 2018.
 
Gartner defines insurtechs as technology companies that -

  • Are in their early stages of operation
  • Drive specific innovation across the insurance value chain by leveraging new technologies, user interfaces, business processes or business models
  • Leverage different forms of funding, including, but not limited to, venture capital

 
The number of technology startups in the insurance industry has more than doubled globally during the last three years, according to Gartner. Digital customer engagement, mobile insurance management and analytics are the most common technology focus areas of insurtechs.
 
As many as,  60% of insurtechs have been founded within the last three years, and two-thirds of them have their headquarters in the U.S. EMEA is the second-most important region for insurtechs, with 27% of Insurtechs having their headquarters there, mainly in Germany and the U.K. In Asia, countries such as Singapore and China (mainly Hong Kong and Shanghai) have begun to promote the development of a local insurtech ecosystem.
 
According to Gartner, insurers have six main options to capitalize on the opportunities that insurtechs provide:

  1. Partner (for example, Axa partnering with BlaBlaCar for carsharing)
  2. Acquire, that is, purchase the intellectual assets and hire all resources of an insurtech
  3. Purchase (like one would buy technology from an incumbent vendor such as SAP)
  4. Invest (obtain a minority or majority share, either directly or indirectly, via a VC arm, such as Allianz's investment in Simplesurance)
  5. Incubate (for example, let insurtechs compete to get into a startup accelerator; mentor them; and give them a space to work and exchange ideas)
  6. Insure the operations or assets of insurtechs
     

Insurance CIOs who are planning to partner with insurtechs also need to be aware of the risks.


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