Technology is transforming the insurance industry, with innovations such as data analysis, artificial intelligence (AI) and the internet of things (IoT) streamlining processes, improving accessibility, accelerating customer service and facilitating risk assessment. At the heart of this are insurtechs, which are providing new partnership opportunities for incumbents, offering support and inspiration in their journey to innovate. “Insurers are increasingly realising that they don’t need to create solutions themselves and are turning to proven, agile, expert insurtech specialists for their parametric insurance products to give them a leading edge,” Carl Carter, Chief Commercial Officer, Blink Parametric, told ITIJ.
Digital disruptors may be considered by more traditional players as ‘risky’, but the perception of insurtechs as entities to be feared by traditional insurers is outdated. Indeed, Bryan Falchuk, Managing Partner of Insurance Evolution Partners, highlighted their role as ‘enablers’: “Many insurtechs aren’t competitors to legacy carriers, but rather enablers and solution providers, so new tools have come on the market at a blistering pace, enabling faster change at better economics than we’ve ever seen.”
Insurtechs’ impact on insurance
A key metric to measure is customer satisfaction, and insurtechs are helping to make insurance increasingly customer friendly and accessible. Jenny Cohen Derfler, CEO and Co-Founder of Air Doctor, told ITIJ: “Insurtech companies are leveraging technology to improve the insurance experience for customers by offering more product personalisation, better customer service, and faster claims processing or even removing claims processes altogether.”
Insurers are increasingly realising that they don’t need to create solutions themselves and are turning to proven, agile, expert insurtech specialists for their parametric insurance products to give them a leading edge
Carter agrees that insurtechs are facilitating an all-round improved customer experience that benefits customers and insurers alike: “The combination of data, mobile phone tech and AI means that insurers can provide innovative and progressive customer experiences,” he said. “As well as benefiting the customer, this also provides insurers with integrated digital platforms that enable faster, cheaper and more scalable claims handling and assistance solutions and communication methods compared to traditional methods.”
ITIJ also spoke with David Gritz, Co-Founder and Managing Director of InsurTech NY, who said that insurtechs are impacting the insurance landscape in two primary ways: “First, they are putting pressure on traditional insurance companies to improve their customer experience and innovate on their ‘stale’ products. Second, they are helping traditional insurers reach new or underaddressed markets with creative and alternative distribution strategies.”
Falchuk also shared his thoughts on how insurtechs are transforming the traditional insurance landscape. “Insurtechs have been creating pressure and the means for traditional players to change,” he said. “Insurtechs are doing new things or old things in different ways across product, customer experience and more. That creates competitive pressure and consumer awareness of options that didn’t exist before, but also creates a blueprint for new approaches and a sort of free testing environment traditional players can watch before investing in change.”
What are insurtechs looking for in a partnership?
Ultimately, the insurtech wants to work with the traditional insurer in partnership to improve products and processes, and benefit the end user: the customer. When it comes to would-be partnerships with insurers, insurtechs have specific requirements, as Falchuk explained: “The most important is a partnership mindset that is free from the notion that one side knows better than the other, and no one is stuck in ‘because we’ve always done it this way’ or ‘but we’ve never done that’ type reasons to resist new ideas.”
Rob Morton, Head of Corporate Communications at Shift Technology, agreed: “It’s critical to remember that it’s not simply what insurtechs need from insurers – but rather what each organisation needs from each other to ensure success.”
Morton also highlighted the need for insurers to be open-minded and, in turn, for insurtechs to be sensitive to the challenges that change can present: “Insurers need to be open to new ideas, new ways of doing things, and to have a real sense that just because ‘we’ve always done it this way’ doesn’t mean that change is bad,” he said. “Digital transformation can be scary. Insurtechs need to acknowledge that change is hard and that change management is critical to the success of any new initiative. Developing this kind of trust is essential.”
Falchuk believes there is room for improvement in this area. “I’m always looking for people’s willingness to be a true partnership and the level of humility they bring to the table,” he said. “I’ve seen so much progress on this front over the past few years, and yet there is still much room for improvement in our industry. I always ask people to try starting from a place of something being possible, and then asking what they’d need to do to make it happen rather than swearing it off from the start.”
The combination of data, mobile phone tech and AI means that insurers can provide innovative and progressive customer experiences
Derfler is in agreement that insurers need to be open-minded and prepared to take risks: “A key factor for a startup’s success while partnering with an insurer is the level of involvement of middle management in the project,” she said. “Leading transformation, especially in the way the business is conducted, requires managers that are supportive of change and ready to cut bureaucratic processes, take the risk, and move forward within a certain level of uncertainty. Startups are looking for insurers that are willing to experiment with new products and business models, in addition to being open to using emerging digital technologies like AI to improve the customer experience.”
Established insurers have a wealth of knowledge and experience behind them, as well as an extensive, loyal customer base.
Insurtechs can benefit from these, just as insurers can benefit from insurtechs’ agility and savviness. As such, Derfler highlighted that successful collaboration requires the sharing of resources and reputation, as well as support: “It’s important that insurers are willing to utilise their brand and reputation to help startups build trust with customers. Insurers should be open to sharing data, providing access to underwriting expertise, and supporting startups in their product and marketing efforts.”
Insurtechs have enabled a positive perception shift of an industry traditionally perceived as slow and risk-averse, according to Morton: “Traditional insurers have often been viewed as technology laggards and slow to adopt innovation. Yet today, that assessment couldn’t be further from the truth,” he said. “The emergence of digital native insurers played a big part. The digital natives tapped into customer demand for near-instant experiences – from policy quote to settlement of claims – and the incumbents started thinking, ‘Hey, there’s no reason we can’t do that too.’ And while the digital natives may have provided some impetus to rethink how business could be done, players like Shift on the enablement side of the equation were supplying new solutions and making it easier to adopt technologies such as artificial intelligence into their IT environments.”
It’s critical to remember that it’s not simply what insurtechs need from insurers – but rather what each organisation needs from each other to ensure success
Derfler agreed: “Insurtechs have helped to improve the insurance industry’s reputation by making it more customer-centric and transparent. By offering more personalised products and services through innovative technology, insurtechs have made it easier for customers to understand their insurance options and make informed decisions. They’ve also streamlined the claims process, making it faster or eliminating it. This has helped to build trust and confidence in the insurance industry – which was previously viewed as slow-moving and out of touch with customers’ needs.”
In the context of evolving consumer needs and a growing desire for personalised and speedy solutions, Carter pointed out that insurtechs are helping the industry adapt to these changing expectations and finding solutions that suit: “The movement towards utilising big data and mobile phone technology to provide new, innovative and real-time solutions is driving rapid change in what was a traditional travel insurance model,” he told ITIJ. “This is happening globally as consumers expect more from their travel insurance providers, with increased desire to self-serve, as we emerge from the pandemic. This also fits well with travel insurers and brands as they fight for differentiation in a hyper-competitive marketplace while under the commercial pressures to reduce costs and increase operational efficiency.”
A two-way street to success
It’s important to keep in mind that the relationship between insurtechs and insurers is mutually beneficial, with the need for cooperation to enact positive changes, as Morton underlined: “The industry’s reputation doesn’t change without actions from both sides. Certainly, the digital natives helped identify the art of the possible and the insurtechs like Shift provided the enabling technology, but the legacy insurers had to change their thinking and approach to technology innovation. Without the ecosystem coming together to drive change, the reputation certainly doesn’t.”
Given the longevity and complexity of the insurance industry, transformation is necessarily happening gradually and, as Falchuk pointed out, this is positive: “I think this is a long game, so no one should expect that reputations or customer sentiment are just ‘changed’. I look at this like a hair-growing situation, where you never really notice it getting longer, but someone who hasn’t seen you for a while calls out how long your hair got,” he told ITIJ. “The truth is, we have been making changes in insurance, and I think insurtech has driven a good amount of that. Every interaction someone has that is better than expected shifts their thinking. It’s too soon to claim victory, but I think more people are starting to notice that our hair got longer, so to speak.”
A partnership that is mutually beneficial and supportive is high on the agenda for insurtechs who want to harness traditional insurers’ experience and customer base to bring to life agile, innovative solutions that speed up or, in some cases, eliminate the need for, processes. Importantly, insurtechs are enablers, not competitors and, providing insurers are open-minded and willing to take risks, insurtechs can ‘level up’ existing products and introduce new ones. This can happen gradually but, ultimately, will happen. As Derfler stated: “Traditional insurance companies must adapt, become more agile, and embrace digitalisation to remain competitive.”
Insurtechs are positively shifting perceptions of insurance. “We are still a long way from children dreaming to work in the insurance industry, but insurtechs are taking us one step closer,” concluded Gritz.