Despite “genuine pressure” from the start-ups that are snapping at their heels, corporate insurers are closing the gap on insurtechs through heavy investment and diversification of strategies, a new report has found.
Since 2016, over $1.97 billion (approximately NZ$2.69 billion) has been invested into insurtech globally, with the top 10 corporate investors pumping on average $91.3 million each into insurtech ventures, according to the research from Tällt Ventures.
“We’re entering an era in which genuinely disruptive start-ups are able to gain almost overnight scale, market authority and social influence. It now takes next to nothing to launch a start-up, and the investment market (both venture and corporate) is pouring money into new, emergent and often disruptive businesses across the entire ecosystem,” Harry Clarke, head of research at Tällt, told Insurance Business.
“This is changing business as we know it. The corporate mainstay is now under genuine pressure to innovate and diversify strategies or risk overnight irrelevance from fierce competition with an unprecedented ability to scale,” he continued.
But it looks as though insurance companies are finally responding, and are now working to bridge this technological gap by revising their innovation strategies. While it’s clear that the large players are funnelling cash into insurtech ventures, the most successful corporate innovation strategies extend beyond investment alone, says Tällt.
“The innovation efforts of corporates are varied and therefore difficult to compare and contrast,” Clarke commented. “That said, they can generally be distilled into three main strands – build, partner and buy.”
With the big corporates able to make large investments thanks to easy access to capital, does that mean that smaller players with less resources are shut out?
“Buying into innovation could help towards delivering your R&D agenda in a short time frame, but it just isn’t an economically viable solution for all,” explained Clarke. “Investment into insurtech ventures is one way of taking steps to remaining relevant in the industry and awakening the potential of your company, but it’s by no means the only way of doing so. Often the best approach for a company will be to develop product & service offerings entirely in-house to compete effectively.”
Based on Tällt’s research, Clarke said the number one learning for insurers is to make sure they know what they are getting into before diving into something new.
“Scan and analyse the venture activity, locally and globally. Track emergent trends within your industry and outside of it and map those to your business,” he said. “Once you are immersed in the new venture ecosystem, get to know what has and hasn’t worked from those who have gone before you. Only then can you execute an effective buy, build or partner strategy.
“Choosing the right strategy, or combination of, at the right time is challenging. Each avenue has benefits and risks in abundance and corporates must be prepared to fail and learn along the way.”
Related stories:
NZ pilot insurtech sets sights on international growth
Is insurance set to become obsolete?
