Insurtechs: use us or lose us
The first survey of Australia’s burgeoning insurtech ecosystem reveals new players’ frustration at an apparent lack of interest from incumbent insurers.
The report, produced by EY in collaboration with Insurtech Australia, says 90% of insurtechs surveyed aim to enable or support the existing insurance industry.
Some 65% say they are enablers of the insurance value chain, and 25% complement that value chain. Only 10% of insurtech respondents see themselves as disrupting and challenging the status quo.
However, despite this desire to collaborate, the response has been disappointing, with 81% believing incumbents are not doing enough.
Local insurtechs report they often get a better response overseas than in their own backyard.
And time may be running out – 56% of insurtechs report they can survive just 12 months based on their current financial position.
“The insurance industry value chain is undergoing a period of profound change, driven by evolving customer expectations, emerging technologies and sustained pressure on margins,” EY Australia Partner Andrew Parton says.
“In this environment, Australian insurers have a significant opportunity to embrace the benefits of insurtech to deliver better customer experience and greater value.
“However, to fully realise the benefits there will need to be increased collaboration between incumbents and new entrants.”
In terms of strategy, 60% of insurtechs say they are already working with incumbents, but they need more.
Insurtechs look to incumbents for access to customers, help to scale into new markets, data sharing and underwriting capability.
They list their top five external challenges as building relationships with channels to market; clients and prospects being too slow to make decisions and/or long-winded procurement processes; customer acquisition; a lack of funding/raising capital; and getting through to the C-level decision-makers.
The top five internal challenges are managing capital; attracting qualified and suitable talent; product and market fit; product development; and business model viability.
Insurtechs’ main ambition for the next year is to “engage in a collaborative relationship with an insurer or other incumbent”. This is followed by geographic expansion, finding new or more funding, working more collaboratively within an existing relationship with an incumbent, and perfecting and finalising the product and value proposition.
The report notes five main areas of opportunity for insurtechs: new products to deliver better customer value propositions; innovative marketing and distribution; pricing and underwriting agility; efficient insurance administration; and smarter loss prevention and remediation.
“Insurtech represents a new way of creating value for insurance incumbents and, ultimately, the end customer,” Mr Parton says.
“Rather than view insurtech as a threat, insurance companies should be looking for new opportunities to work with insurtechs and leverage their respective strengths to help create outcomes for their customers.
“Now is the time for traditional insurers and insurtech players to think ahead and establish the types of innovation strategies and ecosystem models that will lead to Australia becoming a world-leading insurtech ecosystem.”
The report concludes incumbents should be more proactive in embracing digital innovation through collaboration, and local insurtechs should make more effort to differentiate from growing numbers of global players.
Facilitators such as Insurtech Australia, Stone & Chalk, and Tank Stream Labs should also accelerate greater connectivity between local insurtechs and incumbents.
Insurtech Australia CEO Simon O’Dell says the research underlines the fact Australia’s emerging insurtech ecosystem “is looking to enhance rather than disrupt the industry”.
“Yet despite wanting to help, founders and their teams are struggling to gain traction with large insurance companies, and many are getting a warmer response abroad than at home.
“The message to Australia’s large insurance companies is that there is a massive opportunity to work with start-ups in your own backyard.
“By supporting the growth of insurtech, we don’t just help build efficiency and innovation at home, we create bridges to help the Australian insurance industry succeed in international markets.”