Insurtechs are better off partnering with established insurers than trying to jump through regulatory hoops or sourcing the capital they need to compete against incumbents, according to a KPMG industry expert.

NSW Chairman and Australian Leader for the Insurance Sector Martin Blake told insuranceNEWS.com.au incumbent insurers can offer the capital and regulatory expertise, while insurtechs bring technological expertise.

He says insurers are vulnerable to disruption because they have fewer touch points than other businesses, with the basic design of products meaning customer contact happens only once a year, at renewal time.

Start-ups need access to distribution, while insurers lack the time and skill to innovate, so partnership is a win-win.

“The need to partner is really paramount in Australia,” Mr Blake said.

He says Australia has been slow on the uptake with insurtech due to its high level of regulation, the complexity of products and the capital required.

Insurtechs are either “herbivores” or “carnivores”, with the former wanting to partner and the latter seeking to disrupt.

Mr Blake – a speaker at the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) Insurtech Conference – says Australia should encourage more international insurtechs such as Trov to test their products here.

“Australia has the highest level of engagement of the smartphone in the world, which presents a big opportunity for us to get involved in insurtech.”

ANZIIF Digital Insights Manager Amy Gibbs says last week’s Insurtech Conference showed strong sentiment that the Australian Securities and Investments Commission (ASIC) and Australian Prudential Regulation Authority’s “reactive approach” forces insurtechs to partner or be bought out by insurers to pass regulatory hurdles.

“There was frustration that [the regulators’] reluctance to be proactive towards innovation and insurtech was stopping it from happening, or at least stopping it in from evolving in innovative ways,” Dr Gibbs said.

She says ASIC has gone “some way” to allowing insurtech to innovate, but not far enough.