June 18, 2018
The general trend in the global financial services industry has been shifting from disruption to collaboration. While incumbents are looking for innovations, startups are looking for scale. Thus, the growing collaboration between them is delivering win-win benefits at multiple fronts across FinServ.
Leading in this race for collaborative innovation are InsurTech startups and insurance incumbents. Insurance has always been a peculiar segment where the challengers, from the start, have positioned themselves more as an enabler rather than a disruptor. According to McKinsey, 61% of InsurTech companies aim to enable the value chain, while 30% are attempting to disintermediate incumbents, and just 9% are targeting full-scale value chain disruption.
InsurTech startups have the potential to strengthen the tech infrastructure of incumbents and deliver value in terms of enhanced UX, data-driven decision-making, smart underwriting, consumer-responsive product development, etc. As InsurTech startups continue to emerge across various components of the insurance value chain and business lines, incumbents are constantly evaluating opportunities to deploy these applications in the insurance industry today and in the future. This collaboration begins with investments.
Many of the Insurance incumbents have established their own VC arms exclusively focused on InsurTech innovation scouting and investments. In the past few years, more than 75% of funding deals in InsurTech has been led by traditional insurance incumbents. Such investments enable them to evaluate the capabilities of these startup, and then go for a strategic partnership via a pilot/actual implementation.
MEDICI analyzed the InsurTech partnerships of 25 insurance incumbents. These partnerships were categorized in the following major areas of operations:
Digital Claims Management & Fraud Detection
Smart Underwriting &Risk Management
New Product Development
Customer Engagement (Bot/Voice)
Connected Insurance (IoT + Telematics)
In total, there were 95 partnerships established by these 25 incumbents with several InsurTech startups. Digital distribution was the most active area of collaborative innovation, with 20 strategic partnerships between incumbents and InsurTech players. Some of the major partnerships in this space were AXA & Aviva with PolicyPal, Liberty Mutual with CoverWallet and Allianz with Policystreet.
IoT is one of the most prominent use cases in the insurance industry. This is substantiated by a high number of incumbent-InsurTech partnerships (17) in the Connected Insurance (IoT + telematics) space. Some of the most prominent partnerships in this space are Munich Re with Wellgage, Liberty Mutual with Automatic & Allianz with Marmalade.
Smart Underwriting and New Product Development were the other two areas of operation with 17 partnerships. Several incumbents have partnered with key InsurTech startups such as Praedicat, iPipeline, and Cyence to leverage their innovative risk management and underwriting solutions.
Additionally, many insurers have partnered with InsurTech players to launch new products across the insurance value chain. Some examples in this space: AIG’s partnership with Jauntin to launch Canada’s first on-demand insurance smart app; GenRe’s partnership with iXender for blockchain-based insurance product development; and Munich Re’s partnership with Slice Labs to launch an on-demand insurance platform.
Digital claims management and fraud detection had 13 partnerships. E.g. Allstate’s partnership with Carpe Data. Also, there were 11 partnerships in the space of Customer engagement (bot/voice). E.g. HDFC Ergo’s partnership with Ask Arvi.