Investing in InsurTech with discipline

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Many legacy companies look at InsurTech startups as an opportunity to outsource innovation, thinking “We’re often too bureaucratic too innovate quickly, but we can team up with others who do it well.” That reasoning works, up to a point. But a diversified company typically has a fair amount of overlap. Without an effective governance program, those innovation programs become inefficient, or worse. Consider a company with teams in claims, underwriting, auto and homeowners insurance, all looking at innovation opportunities and all scanning the InsurTech landscape. What are the odds that they will align behind a common, coherent approach?

As valuable as it can be for units to scan for relevant InsurTech investments, this is not an innovation strategy. There are many models for doing innovation well: internal labs, minority equity investments, acquisitions, corporate venture capital and more. The most effective approaches have a broad view: global governance tied to a unified strategy, a global investment committee, criteria tied to corporate priorities and the flexibility to allow individual business units to drive their own investments where appropriate.

Insurance companies that succeed with this kind of outsourced innovation tend to have a good idea of what they want to accomplish and a well-defined innovation charter. This includes a sound investment hypothesis and criteria, clear allocation of authority for making decisions and a thoughtfully selected investment committee that is aligned to the overall business strategy. For every dozen attractive InsurTech partnerships, another two dozen are emerging with ideas that might be even better. So, you’ll want a systematic way to source, gather, filter and select the innovation programs that can be most powerful for your company.

insurtech-innovation

Key takeaways

Avoid random efforts. Approach InsurTech with a strategy, effective governance and a process for vetting opportunities.


Cultivate stakeholders. Good ideas don’t sell themselves, so get buy-in for your InsurTech programs.

Follow the right leader. InsurTech programs deserve a leader with real-world experience in launching and scaling innovation.


Allow time to succeed. Give realistic targets, and then have the patience to let programs develop and integrate into the broader company.

Manage InsurTech innovation with rigor

While there’s more risk and opportunity associated with InsurTech, that doesn’t mean “set and forget.” Even if your expectations are more variable, you’ll want to apply the same managerial principles you’d use with any investment or cost-cutting program.

Get the buy-in of key stakeholders to answer critical questions

How tightly are you going to couple your investment with the core business? Do you want it to affect the core within one to three years? What ROI do you expect to achieve? And what happens if you don’t reach that goal? 

Getting buy-in for InsurTech initiatives can be a constant struggle, but it’s worth the effort. Don’t try to force colleagues to see the wisdom of innovation investments, but instead involve people organically throughout the organization with various innovation projects. Show them how innovation can help improve business results. Most importantly, look for a few quick wins. There’s nothing better than tangible results to help people see the value of your program.

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Choose the right people to lead your InsurTech program

Too often, we see companies install a leader with no relevant background as head of an innovation unit because either the person wants to move to Silicon Valley or is close to the firm’s leadership. The innovation unit becomes a parking place for these managers, with predictably negative results. You’ll want to choose a leader with real-world experience in getting innovation off the ground—or the wisdom to hire someone who does. Look for someone with a forward-thinking attitude, perspective and personality needed to drive change, and concrete experience growing revenue for the business.

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Don’t expect immediate results

While some short-term InsurTech projects can generate an immediate return on investment, you shouldn’t judge all projects using the same metric. Many carriers often move on to something else without allowing the current initiative enough time to generate returns. This is particularly true for companies pursuing InsurTech distribution opportunities, as they identify sales growth as the most important innovation metric. This can lead to a bias for short-term results and deter companies from making wise innovation investments that can pay off over the long haul.

We encourage our clients to strive for a healthy mix of quick wins and long-term aspirational projects, using metrics that make sense for each project. And, yes, there may be cases where you’ll treat some innovation projects as purely experimental, without any formal measurement.

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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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