The insurtechs have arrived and are here to stay. The question for incumbent insurers is
pertinent and game-changing: to compete or to collaborate?
An inclusive definition of an insurtech would be that of a player driving innovation in a technology-enabled platform or providing any value-added service in the insurance value chain. Typically, the value add comes from three distinct angles:
- Product development: While the initial focus of insurtech platforms revolved around personal, the platforms have now evolved to address a plethora of areas covering health, auto, life, specialty, travel and business. Micro-duration insurance such as car rental hours, micro-insurance such as mobiles, and ondemand insurance have become more common place, thanks to the advent of insurtech.
- Disintermediation and distribution: Arguably, the most visible impact driven by simplified interfaces of insurtech is in driving comparison portals, digital broking and insurance cross selling, with the twin proposition of accessibility and cost efficiency.
- P2P investments: Disintermediation through peer-networks, engaging directly
- Technology: Improved data analytics, Cognitive AI and IoT applications have made serious inroads into industry daily vocabulary, and not without reason. Right from marketing support and acquisition of the policy holder, to product development, underwriting, policy administration and claims management, the value addition driven is now being increasingly accepted and adopted.
That the insurtechs are here to stay is a fact. Incumbent insurance firms could therefore either choose just to compete, or embrace the development with a collaborative approach, which is gaining increasing acceptance around the world. Interestingly, insurtech has also found itself to be an important agenda for regulators around the world, who are looking to promote sandboxes helping the insurtech start-ups, each looking to promote an environment for both experimentation
Insurtechs are not yet seen to be mature, and winning the trust of customers is not a short-term game
and an inclusive ecosystem, with the new-age insurtech players. This refreshing approach by regulators is expected to potentially bring in a fresh breath of air, driving innovation and new products.
That being said, insurtechs have their limitations in scaling, on account of two factors. One, they are not yet seen to be mature, and winning the trust of customers is not a short-term game. Second, the entry barrier of established presence across international markets and strong regulations – the sandbox investments notwithstanding – pose challenges for insurtech players. In essence, collaboration with established, incumbent insurers would augur well for insurtech companies too.
Evidently, collaboration is well understood to be the mantra for overall development, although there is no one answer to how this can be accomplished. The pertinent questions that potentially drive the collaboration are essentially the following:
- Is the collaborative arrangement complimentary? For example, could the huge repository of data available within an insurer be harnessed better with an insurtech partnership?
- Has the bundling or unbundling of services improved the quality of the product or service delivered? For instance, could there be a micro-duration insurance bundled on top of an existing plan?
- What is the improved value proposition to the customer? For example, has this resulted in an improved service delivery (digital) or from better pricing and transparency?
The real test for every player is in building sustained acceptance in the face of newer demands from the marketplace and meeting the expectations of the new-age millennial. Keeping the customer at the centre would be the critical success factor, and that is a universal dictum. The customer, as they say, is always the king!