The COVID-19 pandemic has accelerated insurance sector plans to improve technology capabilities as pathways open up for partnerships, the Finity Optima report says.

“In the post pandemic world, technology support has gained a new urgency, investment has increased and more overseas insurtechs have set up a local base,” the report says. “Insurance industry players looking for solutions are increasingly tapping into the insurtech ecosystem.”

Finity says after years of restructuring and mass redundancies many experienced insurance professionals have started or joined insurtechs, bringing industry expertise and contacts.

“This helps pave the way for smoother partnerships between incumbents and insurtech providers,” it says. “In addition, we have seen more international insurtechs setting up in Australia, looking for growth by partnering with local entities to provide operational tech.”

An estimated $US7.4 billion ($10.3 billion) was invested in insurtech globally in the first half of 2021, which is higher than the total investment last year.

The report says the insurance industry’s inherent conservatism, founded on the need to predict the future using data from the past, has posed a hindrance to building data and tech capability outside the pricing sphere for incumbents.

But changes, which were in train before the pandemic, have gained traction amid increasing recognition that capability development is needed to respond to issues such as shifting consumer preferences, a more competitive landscape and rising costs.

Agency start-ups without a track record have experienced challenges in seeking underwriting capacity, but the report says partnerships with reinsurers are assisting.

“The technology advantages and reach that agencies often have with consumers mean there is still room for growth as they seek to support brokers who are becoming increasingly vocal about their dissatisfaction with service from insurers,” it says.

Future insurtech trends may include growth in modularisation, where technology bolt-ons are provided by third parties, and embedded insurance, where non-insurance players embed cover in offerings at the point of sale or service.