The Insurtech checklist: Ten differentiators that turn optimisers, transformers and disruptors into Insurtech – part1
Insurtech is hot so the world tells us: VCs and PE firms, large IT companies and a wide range of start-ups all agree. A cynic would however say that two worlds could be hardly further apart: innovation and insurance. A financial services industry with – by its very nature – a long term view on anything, stability as part of its DNA and solidarity as its backbone. A long term view does not spontaneously align with the speed, agility and instant nature of today’s society and innovation. Stability has an uneasy relationship with constant change and solidarity has to be reinvented to find its place in the personalised customer experience.
So which characteristics make technology developments in and for the insurance services industry Insurtech? See whether your Insurtech business model ticks the boxes. In this blogpost the first six.
1. Digital DNA Centric – Customer centric, agile, simple, redesign
Too often – even in start-up designs – we see translations of today’s practices and procedures into a workflow built with new technology. These so-called optimisers have a place in the value chain and can help organisations improve digital access in their current environment. Insurtech should go further: redesign and simplify. Build processes in smaller kernels and connect those rather than ‘boiling the ocean”. There is no other way for existing insurers or new players than going digital: to open up or ring fence existing cores or to build totally scratch and new. This trend is as big as ‘automation’ was in the eighties: a giant leap forward.
2. Instant, Open and Mobile – the new norm for connectivity
Please stop debating this, these are all irreversible societal changes that we see and experience in every walk of life. Insurance is not that unique that these laws do not apply here. Stop your time debating it and look for omni-channel, use that time to develop an open and mobile solution that is instantaneously available with all relevant context. This is not a generational segmentation, we no longer speak of Millennials but of Generation C – the connected customer that reaches across all ages and life styles. What’s more, brokers and expert consultants can be same level stakeholders with equal level access to the workplace as their customers do.
3. Regulation is an opportunity
All too often disruptive start-ups claim to shy away from the establishment, to make a new market but even the Ubers of this world have to deal with the rules of law. And as much as we may complain about the EU and consumer protection bodies, these same institutions create a massive market and playing field with their new technology. Don’t be shy, study the law and find your niche. At the very least understand the impact: making connections and using data for enhanced propositions sounds great, but be sure, things will change after 25 May 2018 in the EU when the GDPR (for a quick and insightful read-up by Capco) kicks in: consent is needed from every single customer or face tough penalties of up to 4% of annual global turnover or €20 million – whichever is the greater amount. On the other hand, PSD2 creates a totally new and open banking and insurance landscape – make sure to be educated and part of it.
4. Fair and acceptable to the world
For too long banking and insurance was primarily the domain of those fully participating in society, preferably with stable financial backgrounds and the more assets the better the service levels one could expect. Customers were too ‘poor to service’ or did not have ‘enough income potential’ to be an interesting ‘target’. New technology makes it possible to service every customer in a ‘fit for purpose’ manner: bank accounts can be as cheap and easy as mobile phone numbers and the ultra-wealthy can have a 24-hour a day virtual concierge. More access to financial services means more economic participation, tax income, business development, financial health and independence and stability. Furthermore, recent debates on ‘tax optimisation’ and wealth gaps together with much more transparency make it clear that it simply is no longer acceptable to not let everyone participate – in a way that suits him or her. What started as a moral and political topic has found a firm place into the investment agenda of PE and VCs too.
5. Data: context is king
Hardly any other industry is as data rich as insurance; banking pales in significance to the data assets of insurance companies. Silos, warehouses, we have seen it all and as we were busy ‘filing’ data appeared faster and in higher volumes by the day. Today we simply speak of structured and unstructured (social) data, which all carries extreme relevance but .. only at a certain moment in time for a certain person or occasion and in a certain context. The good news is that more than ever can we benefit from the pull effect of the right and interested audience when posting relevant content online. All this and more means only one thing: data is nothing – context is everything. Tools galore, make sure you understand the GDPR (outside Europe this will most likely become the acceptable norm too) and build an environment in which the right data can be pulled into that transaction or context to enhance the value for the customer and the relevance to the insurance company. It can be done now!
6. Embrace the eco system
Ownership is out, access is in: access to a wider eco system of business partners. You do not have to own or build something yourself to derive value of it. In an open API system, relevant third parties can be your last mile to a new customer segment or in reverse they pay you for the last mile into your customer basis. Building relevant networks and opening up a network so customers can choose for themselves who they find relevant is the way forward. This speeds up your time to market, your relevance and the richness of the customer experience. Eco systems can equally be entered into to try out new markets, new customer segments or new vertical offerings. Be aware, finding good partners and striking the right deal is one: the devil is in the detail of the cultural fit. Can large settled companies work with small agile ones? Will your teams be able to align? Culture matters most is one lesson we have already learned in the first few steps we have set in this direction as an industry. The ‘how’ is as important to success if not more, than the ‘what’.
Optimizers, Transformers and Disruptors
Our next blogpost will include the other four criteria. But these first six already provide a clear picture. So does everyone have to tick all six boxes to be an Insurtech firm? No, but it is a useful framework to position your company, your ambition and your market. To help investors understand what your ambition is, how fast things might go, how much money you might need and what other resources are key. As disruptive as technology and societal changes have been lately, nothing changes abruptly overnight in business. Disruptors will come, some will grow and become an established part of a new world, others might fail, having learned a lot.
So take a step back and away from your start up dream of being the change agent of the new world and take a critical look at yourself. There is a lot of space for all types of players to make the transformation we as an industry face. We need optimizers – the players who give the industry tangible short term benefits on the road to digitisation. We need transformers, those who do not change the rules of the game, but who do rethink and redesign workflows, transaction processes and entire business flows. And yes, we need disruptors to help the industry shape a new (level) playing field with new opportunities in areas no one could foresee.
The resources needed, the outlook, the potential of return and the addressable markets differ. Optimisers can become transformers after a few years of experience. Transformers however hardly ever become disruptors, the DNA is too different. It has happened but then in a new company with a new team and vision.
Embrace the world of Insurtech, be honest about your position and aim for ten stars in your business model. Stay tuned for the other four criteria and CY ALL in Amsterdam!