Four Reasons Why InsurTech Startups Won’t Get Subdued by Traditional Institutions
TechnologyBit News Today2 min read
InsurTech startups are increasingly forging partnerships with traditional incumbents, especially those in the insurance industry. This trend shows no signs of abating, as 44% of global insurers plan to pursue digital initiatives with startups in the next two years, according to John Cusano of Accenture.
The benefits of these collaborations are already evident. InsurTech companies are leveraging advanced technologies like AI and machine learning to enhance product offerings. For example, they're using data tools to create more personalized Life & Health insurance products. At the same time, these startups are providing around-the-clock services using artificial intelligence, machine learning, and chat-bots, placing greater emphasis on risk mitigation and prevention.
Given these advantages, it's no surprise that traditional insurers are increasingly open to working with InsurTech startups.
Strategic Partnerships and Investments
These partnerships often take the form of strategic investments. Established insurers have kickstarted venture units that invest in promising InsurTech companies.
The motivations for insurers to collaborate with startups are manifold. For one, insurtech companies are increasingly looking beyond the development of brand-new insurance products. As noted by a June 2018 report from the Insurance Journal, investment in insurtech now appears to be moving toward optimizing and modernizing traditional insurance distribution rather than completely disrupting the industry. This represents a shift towards collaboration rather than competition.
From the perspective of the startups, collaboration with traditional players is also advantageous. As Belfatti pointed out in Insurance Journal, tech-driven startups need investment capital to build operations as well as risk capital to support products that cover insurance risks. Partnering with established insurers provides the necessary backing.
Emerging Market Leaders
Success stories exemplify the potential of such partnerships. One striking example is Hippo, an emerging leader in the home insurance market. Hippo raised a $25 million Series B round in January 2018, as reported by TechCrunch. The company's focus on bringing the focus on the customer, as articulated by co-founder and CEO Assaf Wand, underscores how InsurTech firms are shaking up the status quo.
Similar success can be seen with FloodFlash, an insurtech startup that offers a way for customers to insure their property for flood risk, even in high-risk areas, by employing an internet-connected water sensor and raising £1.9m in seed funding. An August 2018 report by TechCrunch highlighted the innovative nature of such offerings.
Conclusion
While InsurTech startups are currently enjoying rapid momentum, insurtech is now a global phenomenon. As InsurTech continues to find its position in the market, partnering with insurtech startups may offer insurance incumbents the opportunity to modernize and thrive.
