Have a coherent strategy for InsurTech innovation

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What insurance industry problem are you trying to solve?

Virtually every insurance carrier wants a world-class claims processing system. Most companies would agree that they could strengthen their underwriting abilities by incorporating artificial intelligence-based risk assessment, and that they could boost revenue by moving into an adjacent, niche market. But does that mean that your top priority should be to buy or partner with an InsurTech that focuses on claims processing, underwriting or that adjacent niche? Not necessarily.

There are always opportunities to grow, but the companies that consistently outperform the market over the long run know that they can’t be good at everything. In fact, a temporary revenue boost can sometimes make things worse if you wind up spread too thin. Sustainable growth comes from understanding what capabilities make (or could make) your company unique. So step back: in a hyper-competitive market, you have to start by focusing on what you do well.

“Insurers are often concerned that InsurTech innovation has a high risk of failure. That’s not the risk to worry about. I’m more concerned when carriers don’t tie their investments to a specific, competitive edge, or if they work with companies that don’t live up to the brand promise.”

Francois Ramette, Partner at Strategy&

Key takeaways

Choose wisely. You may find dozens of tempting opportunities to work with InsurTech or insurance companies. But the costs of any tie-up, in dollars and management attention, can be significant. Is this the most important project right now?

Build on your strengths. Your stakeholders know, or should know, what your brand promises: value, service, innovation, etc. Make sure your InsurTech strategy is more than a hobby by adding to your differentiation.

We do it too. At PwC, we also work with a number of external partners, using their products and services to support projects with our own clients. There are many excellent InsurTech companies, but we have only chosen to work with those that reinforce what our clients have come to expect from PwC.

The power of coherence

Insurers that consistently succeed are ones that understand how they deliver value to their customers. They have an angle (a “way to play”) that everyone from the executive suite to the back office can articulate. They might see themselves as "the" innovators, or as leaders in customer service or low-cost. And to support the path they’ve chosen, they’ve developed a handful of mutually reinforcing capabilities that let them deliver that value. The products and services they offer align with that same set of capabilities.

Increasingly, the InsurTech world offers compelling opportunities for most legacy providers. But just how should your company take advantage of them? At many insurers, there are offerings or even entire business units that are not aligned with the firm’s core strengths. Adding more to the mix, however interesting, doesn’t add to a sustainable engine of growth unless the InsurTech company builds on the legacy carrier’s existing strengths.

Working together: How we do it

Any time your company teams up with a third party—a payments processor or even a contract programmer—you are balancing the benefits with some additional risk and management overhead. So, even when you identify a would-be partner that is accretive to your strengths, you’ll want to understand those trade-offs.

At PwC, we have developed a strict process to manage the number of joint business relationships (JBRs) that we maintain. We constantly scan the InsurTech market to identify potential business partners that could help us better support our clients. We follow these same criteria: when we team with or acquire another company, we make sure that we’re aligning with our existing services and strengths. We know, for example, that trust is an essential part of our offering, so we are careful to avoid associating with firms that might jeopardize it. There are many interesting, emerging InsurTech and other technology organizations that we could draw upon to add value to our clients, but we only establish JBRs with companies that add to our own coherent value proposition.

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:

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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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