Insurance companies need to prepare themselves: the digital wave has reached the sector’s shores. For more than a decade, incumbent underwriters, brokers and UMAs have noted the potential impact of technology but did pretty little about it. This attitude has created a gap for a fledgeling insurtech market to develop.
Insurtech seems small, but this is relative. Incumbent insurers are typically vast and entrenched organisations, so you can easily assume that, by comparison, insurtech is not much of a threat. New insurance startups are not yet translating into a disruptive force that will push the industry into a new mould.
But according to the legal firm Norton Rose Fulbright, the lag among insurtechs have much to do with the state of the industry they want to transform, notably:
- Insurtechs often rely on incumbent insurers’ licences.
- Insurance products are comparatively more complex than those of other financial services.
- The insurance industry’s capital, prudential and supervisory requirements are not always compatible with startups.
- Legacy systems at incumbents hamper the adoption of newer technology-driven improvements.
Yet, these reasons shouldn’t comfort insurers. They reflect an industry caught in its complexity and hamstrung by a lack of competition. You can see the difference if you compare insurance to other financial service companies, explains Sean Pyott, managing director of risk management technology provider, thryve:
“There are two trends among major banks that should concern insurance houses. First is that they are all investing heavily in creating software platforms to control their digitisation. Second is that they are enthusiastic about partnering with fintechs, leveraging more agile partners to help them develop their own capabilities. And the two go together – more and more banks are providing API marketplaces, enabling fintechs and others to connect to their systems.”
Preparing for the digital revolution
Insurance companies may be poking at digitisation and partnerships with insurtech startups, but they are well behind the curve set by other FSI companies. CIOs are taking notice – many ambitious technology professionals are taking up positions in smaller insurance firms. They can sense a technology revolution brewing in insurance and want to ride that wave.
Such ambitious plans will need room and resources to flourish. It has taken banks many years of investment to reach highly digitised states that they control and use to support fundamental cultural and business plan changes. But insurers can create significant breathing room if they rely on the right technology options.
“Insurance underwriters and brokers do have one advantage from delaying their digitisation,” says Riaan Bekker, thryve’s Force Solutions Manager. “While they were waiting, the platform market has matured a lot. Platforms are a new generation of software that is much more multi-purpose and flexible that other types of software, and much less expensive to acquire and deploy. They are also the foundation for new types of applications, such as Riskonnect, which provides modern integrated risk practices.”
There are two good reasons to invest in a software service, such as Riskonnect. It provides a more nuanced and inclusive view of an insurer’s risk options, which can open headroom to further modernise a business. It also operates as a foundation for digitisation – for example, some of thryve’s clients that manage large corporate insurance portfolios use Riskonnect to offer self-service and reporting products to their customers.
Insurtechs and fintechs are massive supporters of the platform world. So are banks – recently, both Nedbank and Absa launched platforms that expand to current and future services to partners and customers.
The primary reason why this isn’t happening in insurance is because of the industry’s internal barriers, noted in the four above points. But that won’t last. Insurers want to cut costs. They also want to move closer to customers and offer more services over products. 61% of insurers already derive 30% of their revenue from services (Deloitte).
Becoming a digital-first and customer-centric insurance business won’t happen overnight. But you don’t have to start from scratch to get started. Riskonnect can create the digital foundation you need and start salvaging resources through efficiencies such as process automation.
The insurtech revolution is already underway. Whether you’re a CIO looking to make your reputation digitising the industry, or if you are an incumbent not willing to wait for the change to catch you, contact thryve today. Let us demonstrate how we can use Riskonnect and other platform-based technologies to give you that insurtech advantage over your competitors.