Startup entrepreneurs are drawn to InsurTech ventures for good reason, according to a recent report from Accenture, the international management consulting and professional services company based in Dublin, Ireland.
Entitled "The Rise of Insurtech: How young startups and a mature industry can bring out the best in one another," the report found that innovation-driven growing pains in the insurance industry should ultimately bear significant fruit:
"We've seen a rapid acceleration of investment into and deal activity around intelligent automation and IoT start-ups over the last 12 months," said Roy Jubraj, a co-author of the report and Accenture's Digital & Innovation lead in the company's Financial Services practice in the U.K. and Ireland. "These technologies are primed to disrupt the industry in the years to come."
Data from Accenture's Technology Vision for Insurance 2017 determined that most insurers recognize the need and urgency to innovate. Consider that:
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- Eighty-seven (87%) percent insurers agree that technology is no longer advancing in a linear fashion, but rather at an exponential rate.
- Eighty-six (86%) percent of insurers believe they must innovate at an increasingly rapid pace simply to retain a competitive edge.
- Ninety-six (96%) percent of insurers think that digital ecosystems are having an impact on the insurance industry
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The report also cites data from CB Insights, the New York City market research firm, that determined "both the volume and value" of InsurTech investment in the United Kingdom alone doubled between 2014 and 2016, with total investment reaching $1.7 billion.
Continue on for three distinct reasons why startup entrepreneurs are drawn to InsurTech ventures.
Thirty AI-driven InsurTech startups launched in 2016, according to Accenture. (Photo: iStock)
No. 3: Big data, analytics and artificial intelligence are hot.
The insurance industry now views these functions as essential to its ability to deliver the level of customer service and personalization demaned by today's digital-savvy consumer.
Accenture's report found that the total number of InsurTech deals based on AI and automation service, or that fuel the IoT (Internet of Things) market increased 79 percent in 2016, which accounted for 44 percent, or $711 million, of total InsurTech investment.
Consider that the number of InsurTech startups just focused on big data use more than doubled between 2014 and 2016:
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- Accenture counted 24 data-driven InsurTech startups in 2014.
- There were 50 data-driven InsurTech startups in 2015.
- There were 60 data-driven InsurTech startups in 2016.
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Related: Embrace the shift! Transforming the insurance industry from the outside-in
Insurers struggle with the risks associated with innovation. (Photo: iStock)
No. 2: Traditional insurers continue to face innovation headaches.
The sheer volume of InsureTech startups coming to market has compelled traditional insurers to step up their digital strategies while at the same time revealing significant challenges facing the industry.
Among the innovation questions that continue to haunt insurers, according to Accenture:
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- Could the risks of high-tech disruption outweigh the benefits?
- How reliable is big data?
- How committed are traditional insurers to fundamentally changing their business processes?
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The Accenture report quotes Renaud Million, co-founder & CEO of SPIXII, an insurance technology company based in England:
"I felt that the insurance industry was very traditional and suffering from a communication issue with its customers, especially the digital customers," Million said. "For me, it was clear that insurance products should start from the customer rather than from pre-existing processes."
It can be hard for traditional companies to make peace with the need to team up with young businesses. (Photo: iStock)
No. 1: Incumbents now recognize the value of InsurTech collaborations.
Researchers determined that some traditional insurers are beginning to recognize their limitations with regards to internal innovation, and looking for business partners who can help.
"I've been very impressed by insurers' willingness to learn, and the involvement of the broader ecosystem (analytics firms, consultancies, conferences and the media) has also helped bridge the gap between InsurTechs and traditional insurers," Erik Abrahamsson Founder & CEO of Digital Fineprint, a London-based company that gleans insurance data from customer social media use, told Accenture researchers. "That being said, we can always do more."
Accenture determined that 26 percent of incumbent insurers currently funnel cash into digital startups, and only 17 percent of them maintain an in-house venture capital fund for growing digital or tech-driven business interests.
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Elana Ashanti Jefferson
Elana Ashanti Jefferson serves as ALM's PropertyCasualty360 Group Chief Editor. She is a veteran journalist and communications professional. Reach her by sending an e-mail to [email protected].
