Nearly three-quarters of insurtechs are collaborating with insurers in a sign of strong progress for the digital start-ups, an annual report released today shows.

According to the joint report by EY and Insurtech Australia, there has been a 75% increase in “active partnerships”, which augurs well for the future of insurtechs who last year voiced frustration at the lack of interest from incumbents.

There has been clear improvement, however only 18% of insurtechs believe incumbents are "doing enough" to collaborate and drive innovation.

“Insurtechs are helping incumbents to develop innovative insurance products and deliver services that better align with customer expectations,” the report says.

“The uplift in collaboration suggests incumbents are starting to embed insurtech innovation in targeted parts of their operations to create value in new ways.

“We also expect incumbents seeking to leverage emerging technologies as a defensive strategy to meet the demands [of] the Hayne royal commission that they demonstrate they are providing the right product, to the right customer at the right price.”

Viewed initially as merely industry disruptors, incumbents now recognise insurtechs could fill technology gaps in key areas of the business. These include pricing and underwriting agility, efficient insurance administration, and smarter loss prevention and remediation.

“Australia’s insurtechs are maturing and growing… They are playing an ever more important role in the future of incumbents," the report says.

"Insurtechs hold the key to helping incumbents accelerate their transformation to become digital insurers.

“The clear majority of insurtechs are focusing their business on enabling incumbents, with relatively fewer attempting to disrupt the industry.”

Insurtechs are on a financially stronger footing too. About 71% of insurtechs are in the post-revenue stage, up from 50% last year, according to the report.

The number of insurtechs operating here increased 53% and about 30% of the start-ups were started overseas before setting up bases locally.

“We are really pleased with the data that has come through because it validates the quick evolution of our ecosystem as a collective as well as the performance of the insurtechs individually,” Insurtech Australia CEO Simon O’Dell told insuranceNEWS.com.au.

“It is part of our objective to attract more insurtechs than we leak… and if we create an environment attractive for insurtechs from overseas to come and scale and launch their products and services, it helps our incumbents to innovate, it helps create a thriving innovation ecosystem.

“In that regard, it is a really big positive. The next step is to take advantage of the insurance incumbents’ appetite to partner and also to take advantage of the networks that have been created in the global marketplaces in London, Europe and the US.”

The report is based on answers from 54 respondents made up of 39 insurtechs, 12 incumbents and three intermediaries or service providers.