This is InsurTech’s moment. Will insurers seize the opportunity?

InsurTech has become a powerful driver of change in the insurance industry, but it’s no silver bullet. Learn how to make its innovations work for you by putting the focus back where it belongs: on the capabilities that make your company unique.

InsurTech’s moment: Legacy companies, startups and the drive for faster, cheaper and better results

Insurance is boring. You might hear that from people who don’t know better. But the ones who are paying attention understand that some of the most interesting work in technology is taking place in insurance.

Recently, legacy insurers have started paying much more attention to newcomers. They've become some of the largest funders of these startups, recognizing that teaming up with technology firms can be a game-changer.

But here’s the harsh reality: many if not most of these business relationships won’t meet expectations. When insurers turn to InsurTech for the wrong reasons, or without a clear, sustainable plan to extract value, they’ll fail.

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PwC’s Marie Carr and Tom Kavanaugh describe how insurers are making InsurTech an integral part of how they operate.

Getting the most from InsurTech

When insurance companies start exploring InsurTech, they often zoom in on the tech first, looking for new systems to revolutionize procedures such as claims processing. Leaders look beyond features and functionality. These are the key components that take an InsurTech plan from strategy to execution:

InsurTech and the Fourth Industrial Revolution (4IR): The rules are changing

How did we get here—and so quickly? The answer tells us a lot about what comes next. The insurance industry has grown in parallel with the economy. Each time there's been a major leap in technology, the industry has responded with new products, new methods of distribution and new ways to evaluate risk. We’re at another inflection point, and the cycle is repeating itself in what has been dubbed the Fourth Industrial Revolution. We’ve arguably seen more technological innovation in the past decade than in the five decades that preceded it.

Fifty years ago, insurance companies were some of the earliest users of mainframe computers. The smartphone in your pocket today is literally thousands of times more powerful than those early machines, and customer data is now stored in the cloud rather than a carrier’s premises. Similarly, communications capabilities have exploded, and as 5G mobile networks emerge over the next decade, still more transformative technologies will become more practical, such as drones and autonomous vehicles. Each of these shifts has upended long-held industry assumptions about business and operating models, organizational structures and market strategies.

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What this means for insurance professionals

  • There are many ways to win, but you have to choose a clear path forward. The InsurTech space is filled with good ideas, and many young companies have outstanding people and technology. While many tie-ups may seem appealing on paper, prescient leaders know to ask why—and ask it again. Investors and other stakeholders look most favorably on insurance companies with a coherent strategy: from carriers and third party administrators to technology vendors, agents, brokers and beyond.
  • There are new sources of value. The model of collecting premiums for distributed risk has been fairly static for years, but InsurTech companies are now moving ahead with pay-per-use, an emphasis on loss prevention, restorative services and more. Legacy carriers can learn from these startups by forgetting some of what they "know" to be true.
  • What used to be a sign of success may not be anymore. Buyers don’t necessarily correlate “large” with trust or stability like they once did. And while large organizations don’t have to be more bureaucratic than smaller companies, they often are. Correspondingly, if insurers aren’t careful when they team up with InsurTech companies, their size and often more stolid culture can actually destroy the value that a tie-up promised.
  • Speed matters more than ever. People want next day delivery and credit decisions in 60 seconds. Naturally, they also expect speedy underwriting decisions, claims adjustment, service requests and even product development. InsurTech companies can often help carriers deliver these benefits to customers and prospects, if both parties share a common goal and understand their respective roles in achieving it.

Defining InsurTech: Now, it’s bigger than insurance.

What is an InsurTech company? In 2016, when the term barely registered in Internet searches, it generally referred to a technology startup seeking to make a mark on the insurance industry. Only a few years later, the same search generates more than three million results. InsurTech offerings have grown exponentially, but there’s still uncertainty about what InsurTech really includes.

That’s because InsurTech goals keep changing. We’ve moved well beyond InsurTech-as-disruptor-and-threat. In our most recent Global CEO Survey, far fewer industry executives said that they were concerned about the speed of technological change, changing consumer behavior or new market entrants. We’ve shifted toward collaboration, as both startups and legacy providers realize that they gain from combining the former’s technology with the latter’s customer knowledge, understanding of risks and capital strength.

Now, InsurTech is an ecosystem that brings together adjacent industries to provide an improved service of greater value to insurers and their customers. Adjacent industries of particular relevance include agriculture, health, cybersecurity, the sharing economy, wealth management, transportation and more.

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The InsurTech landscape

At the annual InsureTech Connect conference, you’ll find legacy companies and tech-driven startups addressing every sector. There are pure technology firms providing core systems and components using a software as a service (SaaS) model. There are companies selling artificial intelligence (AI)-based predictive analytics, and risk assessment offerings that introduce new data sources. There are plenty of other InsurTechs that address distribution, leverage telematics, pursue unserved niche markets, offer comparative pricing and broker services and more. You get the idea: the sheer volume of companies that have emerged to support (or compete in) the insurance space reflects the appetite for change and the opportunities that potentially await.

These opportunities go far beyond the front office. Insurers, and many InsurTech companies themselves, are also turning to technology companies that provide more generalized business support: cloud computing, intelligent automation, human resources systems, loyalty programs, workflow management and more.

Whether you lead a legacy provider or a startup, there are many, many options to explore. But too much choice can be distracting or even counterproductive, like getting 2,000 search results for sneakers when all you want is one pair. The best way to cut through the noise is to look internally first, identifying your strengths and assessing how you can build on them.

Contact us

Matt Adams

Insurance Practice Leader, PwC US

Ellen Walsh

Insurance Advisory Leader, PwC US

John Fosbenner

Insurance Assurance Leader, PwC US

Julie Goosman

Insurance Tax Leader, PwC US

Richard de Haan

Actuarial Leader, PwC US

Eric Trowbridge

Insurance Marketing Leader, PwC US

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