The Largest Insurers Are Building Incumbents to Ride the InsurTech Wave

InsurTech has a relatively young, but quite a colorful history. There are already at least 80 hot InsurTech startups shaking up the trillion-dollar industry. The insurance industry is one of the most massive and complex ecosystems with large and powerful corporate players. In fact, it is the biggest industry in the US with net premiums of $1.1 trillion in 2014. Insurance carriers and related activities contributed $421.4 billion, or 2.5% of the United States’ gross domestic product in 2013.

Since 2013, insurance tech has been actively taking off and creating its own niche in the market. In 2016, several incumbents are planning to disrupt the $4.5-trillion industry by leveraging technological capabilities. The use of disruptive technologies like big data, Internet of Things (IoT), mobility, social network and blockchain are gaining momentum and InsurTech firms are looking for a scope to capitalize it.

The rapid growth of InsurTech startups and interest from VC firms served as a sign to corporate players that the competition is toughening up. Just like banks with FinTech startups, the world’s largest insurers have decided to take action in order to stay relevant and not miss out on possible takeovers.

The first example is MetLife, one of the largest insurance companies in the world. The company recently announced its Q1 2016 financial results with operating earnings of $1.3 billion, which is down 19% from Q1 2015. The almost 20% plummet could be one of the factors the company put efforts to give a second life to insurance through LumenLab, a MetLife innovation center in Singapore.

LumenLab was launched last year as the first-of-its-kind disruptive innovation center for MetLife. The 7,800-square-foot facility houses a working space and business incubator, many of whom have a background in startups or come from outside the insurance industry. LumenLab has been established to develop disruptive new business models in the areas of wellness, wealth and retirement.

As Mr. Christopher G. Townsend, President, Asia of MetLife, shared in the official press release at the time of launch, It [LumenLab] is a business creation engine, focused on illuminating new business models for the market. At MetLife, we believe technological, customer and socio-economic trends impacting the Asian life insurance market make it ripe for disruption. As LumenLab spawns new and disruptive business models, we anticipate that it will be retrospectively seen as a visionary and shrewd investment.

Aviva, a British multinational insurance company with 33 million customers across 16 countries, is another example. The company has launched an initiative to encourage entrepreneurs to develop disruptive solutions. As Aviva Innovation’s website states, Our mission is to connect with extraordinary talent, uncover breakthrough innovations and give those breakthrough innovations the opportunity to thrive.

Aviva has been working closely with NewFinance, the 3 Beards and Startup Weekend to offer startups the right resources and support to develop their business ideas. Aviva Innovation also organizes a FinTech hackathon and plans to hold one later in 2016. With the Aviva Innovation initiative, the company has established a community focused on developing InsurTech ideas.

At the end of last year, Aviva also launched its Digital Garage in Singapore – a dedicated space where technical specialists, creative designers and business leaders explore, collaborate and test new insurance ideas and services which make financial services more tailored and accessible for customers.

At the end of last year, Axa (not an insurance company, but a notable investor) announced the creation of Kamet, a €100M InsurTech incubator dedicated to conceptualizing, launching and accompanying disruptive products and services for insurance clients.

Henri de Castries, Chairman and CEO of Axa, commented in the press release, The digital revolution is transforming the entire insurance value chain. Kamet will become another pillar of our strategy to connect the Group to the InsurTech ecosystem, joining forces with our existing trend spotter AXA Lab and investment structure AXA Strategic Ventures. Axa’s Kemet goal is to imagine disruptive projects and incubate startups linked to the company’s insurance business.

A number of insurance companies are involved in another initiative – Global Insurance Accelerator. The Global Insurance Accelerator is a mentor-driven business accelerator designed to foster innovation in the insurance industry by supporting startups targeting the global insurance industry. Insurance carriers and insurance executives are the investors and mentors in GIA.

GIA accepts early-stage companies who are building solutions that support the insurance industry and provides seed funding, access to mentors and office space in Des Moines for 100 days of on-site support and time on stage at the Global Insurance Symposium to a crowd of hundreds of industry executives.

Another large insurer with 85.4 million customers across 80 countries, Allianz, is actively involved in innovating the insurance industry. The insurer has launched the Allianz Digital Accelerator, the innovation lab and new business building team for the Allianz Group. Allianz Digital Accelerator states that its mission is to actively shape the future of insurance, asset management and assistance services. The Accelerator does it by identifying and transforming promising ideas into successful businesses. For this purpose, ADA applies lean innovation methodologies in an open, interconnected environment of entrepreneurs, specialists and industry experts.

XL Catlin, a global insurance company headquartered in Ireland, has launched its venture capital fund focused on creating businesses that provide new and innovative solutions to risk. XL Innovate sponsors global entrepreneurial teams with ideas for innovative approaches, applications and technology-driven enhancements of insurance and risk management. The fund invests in and builds businesses that are addressing large markets and have the potential to become significant new companies.

As a venture capital investor, XL Innovate focuses its attention on new and early-stage businesses. Probable investments include information technology companies, new approaches to distribution and underwriting teams addressing new risk opportunities.

The list is certainly not exhaustive, there are more initiatives by international insurers to support the startup ecosystem and leverage new opportunities. According to some estimations, large insurers have committed more than $1 billion to investments in startups in an effort to find new ways to grow and head off potentially disruptive threats.