Investing in Innovation: An Insurance Carrier’s Guide to Insurtech Engagement

Abstract

In a heavily digitized world of speed and convenience - where anyone can purchase groceries, hail a driver, and file their taxes from the comfort of home with just a few clicks or taps - consumers demand ease in everything they do. These expectations do not stop short of the insurance experience, and companies that fail to modernize and accommodate them will surely be left behind. Insurers need not fear, however, as substantial opportunity and assistance exists in the growing landscape of insurance technology (“insurtech”). This report aims to provide a comprehensive guide to properly navigating and taking advantage of insurtech for insurance carriers. Despite its overarching theme, insurtech comes in infinite forms, with a variety of specific objectives, for use by every party in the insurance industry. Therefore, the first section of this report breaks down the complexities of insurtech to define it broadly, explain its origins, and analyze leading technologies in the space. In addition, the first section further explores why insurtech relationships are almost always necessary for survival as a carrier, regardless of the difficulties they present. Broken into the five main stages of insurtech engagement, the second section draws heavily from our interviews with insurance innovation leaders to emphasize the most crucial action points for maximizing success in each step. This includes assessing resources such as budgetary capacity and human capital to determine whether external innovation is optimal, utilizing a variety of sources - most importantly insurtech accelerators - to stay informed of insurtech trends and offerings, and creating a standardized process for testing and evaluating potential solutions. Assuming a desired and compatible insurtech is discovered, we discuss how a carrier’s needs and capabilities dictate its form of engagement (i.e., partnership, acquisition, or other) and provide essential considerations for fostering a fruitful insurtech relationship of any structure. The third and final section of the report summarizes our findings and highlights prominent technologies such as blockchain that are predicted to drive the future of insurtech. Lastly, we encourage carriers of all sizes to prioritize their technological advancement by devoting resources to insurtech learning, testing, and investment.