At a large insurance company, this may be a familiar scenario: you encounter a new insurtech - perhaps at an event, or by stumbling across a demo video. From what you’ve seen, you believe this technology has the potential to make a significant impact, engage your customer base and proving your business to be at the forefront of tech advancements. It’s potentially a solution for what you perceive to be one of your organization’s biggest pain points. Someone from your company should get this team on board, and use this technology to your advantage. Maybe the head of innovation - they’re probably all over this, right?
For too many insurance companies, the opportunities presented by the recent boom of insurtech are being passed by - either because the company has no strategy in place to recognize worthy opportunities, or because the partnerships they are establishing are lacking communication and become ineffective. Often the responsibility of ‘innovation’ sits siloed within one specific department, when it really ought to be a high priority right across the business, including at the executive level.
A report from PwC found 56 percent of surveyed insurance companies believed they might be at risk of losing up to 20 percent of their revenue to insurtechs, while Accenture found 44 percent of insurance companies globally do plan to work in partnership with insurtech startups over the next two years.
On the insurtech side, an EY survey of the New Zealand market found 72 percent of insurtechs are already working with an established insurance company, but 63 percent believe there is still not enough collaboration with established insurers to realize a successful transformation of the insurance industry ecosystem.
The real disconnect here is when insurance companies don’t have a strategy for partnering with insurtechs, which is vital if they hope to successfully engage with prospective insurtech opportunities. We’ve put together an outline of some of the most important factors you need to consider in creating this strategy, and moving forward with effective partnerships.
What’s your problem?
Before anything else, an insurer must identify the problems it needs to solve, and which are its biggest priority, to optimize operations. Having a clear, prioritized picture of the company’s most significant needs means you can check an insurtech’s initial proposition against them, and determine whether to take a conversation further. Identifying these problems, and insuring your desired outcomes have buy-in at an executive level, will help to track success in the pilot stage.
It’s also important to identify any guiding principles for how the company is willing to partner, and any guidelines for the kinds of insurtech companies the company is willing to consider. Too often insurers, leave themselves open to any insurtech solutions that come along. While keeping an open mind can lead to some great outcomes, neglecting to determine these guiding principles can leave you with impulse deals that miss the mark for your company.
Being disciplined about sticking to these business objectives helps you avoid being sucked into hyped-up, hot trends and gimmicks that might sound exciting in your next report but add no real value long-term.
Partnering with insurtechs is not the same as becoming an insurtech incubator, so once you find an insurtech with a technology that might fit your priorities, ensure they are in a position to deliver a product-market fit right away. Leo Capital’s Shwetank Verma recommends that insurtechs have at least one round of institutional funding, and recommends checking to ensure their funding is verified, to ensure you are not wasting your time. “Use tools like Crunchbase and Tracxn to vet startups, and speak to at least one investor or customer as part of your due diligence.”
It may be necessary to offer more support to an insurtech in the early stages of the partnership, to ensure they have a full understanding and can comply with all security requirements and regulations.
What’s your process?
If you take a look at your company’s traditional comparison and procurement methods, you will most likely find these simply aren’t compatible with an insurtech. Insurtech partnership models are a new frontier, meaning your company probably lack any directly comparable solutions.
Benekiva CEO Brent Williams said, while insurance companies certainly need to carry out their due diligence on insurtechs, the reality is startup tech companies will not have the resources to navigate a traditional vendor procurement process. “I am suggesting that you need to have a separate procurement process that is a bit friendlier if you want to work with these companies.”
Ensuring you have a specific insurtech approach, approved at procurement’s executive level, enables an easier engagement process as well as faster decision making and collaboration.
For any insurtech partnership to be successful, the value of innovation needs to be recognized broadly at a senior level, not just in the CIO position. There needs to be an understanding that a successful partnership may lead to a truly new way of working that goes beyond merely digitizing legacy solutions and towards changing the business model.
Ensuring the value of an insurtech is understood and supported by executives will help to mitigate roadblocks throughout the process, and help the partnership to develop much more quickly.
Manage the resistance
Another hurdle is the potential for resistance from an insurance company’s internal IT department, who may perceive an insurtech as a threat to their standard operations. Having an insurtech strategy in place can ensure IT understands the specific business problems your company is focused on, and provides an opportunity to solicit valuable input from them in determining how a prospective insurtech partner might integrate successfully into existing operations.
Test and learn
Stephen Goldstein advises beginning a promising insurtech partnership by agreeing to a pilot and Proof of Concept - and also advises working to dial-down the onerous traditional approval process for these initial steps by adopting a ‘test and learn’ approach. For the insurance company to move in a more agile way and progress quickly, it’s not only important to ensure an insurtech startup has the resources to persevere with proving their solution, it’s also vital to identify the opportunities which lend the insurer a real competitive advantage as an early adopter of the technology.
Once you’ve identified an insurtech to partner with, the scope of the partnership must be clearly documented to ensure both parties are focused on the business objectives throughout the pilot and Proof of Concept process. Being able to bring all requests and outcomes back to that clearly defined scope helps keep the relationship on task, especially as other personnel become involved.
Having success metrics and next steps determined before work begins ensures the goal is very clear, and that when the concept is proven successful against your criteria, a partnership roadmap for scaling the technology throughout the business is already in place.
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