Insurtech: How Australian and New Zealand insurers can respond to emerging technology, startups and the innovator’s dilemma

On 7th September 2017, I was pleased to represent Insurtech Australia at the ANZIIF Insurance Conference in New Zealand. The conference looked to explore customer experience in insurance today and how organisations that deliver a superior customer experience are thriving and, as a result, customers are rewarding the organisations with customer loyalty. Thank you to the Prue Willsford CEO ANZIIF, the wonderful team and the panelists.

In the afternoon, my session “Insurtech: NZ in the global context” focussed on providing an overview of insurtech, global trends and activity and then explored what insurers can do to respond and get ready. You can access the slides here.

The definition of insurtech I proposed at the conference is:

“The application of technology innovation in the insurance industry value chain, to solve known challenges and discover unknown opportunities, in order to deliver value for customers”

Insurtech is also more than just technology. It is about looking for opportunities across the insurance industry value chain, both for improvements and disruption. It’s not just distribution, it’s not just startups doing it and it’s not something that can be readily ignored. Insurtech also includes improvements to the operating model, business model and new applications.

Insurtech: More than technology

Investment in insurtech has been rising globally since 2014, with the re-insurers MunichRe and SwissRe leading the charge. According to data from CBInsights, total deal activity has increased seven-fold over the past decade, averaging $1.7 billion a year from 2014 to 2016, compared to $250 million a year, from 2011 to 2013. The launch of US-based Lemonade and Trov have generated a huge media buzz and a good deal of investor excitement.

Investment rising in insurtech

Interestingly however, investment in insurtech is not just about disrupting the insurance stack. According to McKinsey, 61% of insurtechs are in fact looking to enable the insurance value chain. This provides opportunities for insurers to partner to drive improvements in their existing businesses.

Importantly, insurers have the opportunity to respond, or ignore the threat of emerging technology at their own peril. Whilst insurance will remain as an important product for both retail and commercial customers, the way it is distributed, the types of products consumed and who buys it will inevitably change. Technology is the enabler in that change. Disruption happens quickly, and often by the time you are aware of the disruption, then it is too late to respond.

This from Walter Kielholz, Chairman SwissRe in 2016:

Insurers need to respond and develop proactive strategies as to how they will tackle innovation and insurtech. To be “digital” is now a default expectation for customers, and to go beyond requires further investment and effort. This challenge is however not unique to insurance. In fact, it is an incumbent challenge and commonly known as the “Innovator’s Dilemma” as businesses try and address the conflict of which customer segment should you serve.

In response to the threat of Insurtech disruption and to overcome the innovator’s dilemma, I proposed my 7 Steps to Insurtech Success to help insurers start to respond to insurtech and “get ready” for startups.

7 Steps to Insurtech Success

In summary, these steps are:

  1. Respond — The need to take an active response in your strategy to pursue technology and innovation. Use a discovery driven planning process or “Future Backed Strategy” in which to discover new growth businesses.
  2. Diversify — Use a portfolio mentality and spread investment across the core business, sustaining innovation and importantly, how you will change the game.
  3. Explore — Uncover the technology and innovation that you can use, and that which adds value to your business.
  4. Experiment — Get outside the building, use a test and learn mindset to experiment with new growth businesses, technology and startups. Pilots are a great way to do this.
  5. Be ready — Most insurers are wanting to work with insurtechs. But are you ready? Have a focussed strategy, internal champions, dedicated investment, a procurement process that isn’t 18 months, and be prepared to move fast. Each week you delay, is one week shorter on the runway for the insurtechs you are looking to work with.
  6. Use your core — Your core assets are just that. Use them to your advantage such as brands, customers and partners. But, look to do something differently.
  7. Grow talent — Organisations don’t innovate, people do. Find and grow your talent to help execute on your strategy. They all won’t come from within, and they shouldn’t. Look outside for your game changers.

If you want to read more on my presentation, the trends and activity in insurtech, you can access the slides here.

Brenton Charnley is the Lead and Co-founder of Insurtech Australia and Insurtech Sydney, both member organisations looking to develop the insurtech community and further insurance innovation more broadly. Brenton is also the Founder of Alpha39 innovation and insurtech advisory.

Scaling global tech startups. Head of Australia @ TrueLayer ex-COO @CoverGenius