Insurers and InsurTechs

Destined to become joined at the hip

As a former magazine editor, I know firsthand how quickly long-established incumbents can be brought to their knees by technological disruption if they fail to anticipate change and quickly adapt with new business models.

November 15, 2017

A blog post by Sam Friedman, Insurance research leader, Deloitte Services LP.

The print journalism landscape is littered with the skeletons of dinosaurs who wouldn’t or couldn’t evolve to keep up with the digital demands of web-centric consumers. Luckily, the insurance industry doesn’t appear to making the same mistakes, judging from the smooth interface between startups and legacy carriers I observed at the recent InsurTech Connect conference.

At first, InsurTechs were seen by many in the industry as existential threats, but the panic attacks have generally given way to a more sober appreciation of how disruption could be leveraged to a particular carrier’s advantage. More insurers are looking to capitalize on a potential competitive edge provided by a new system, algorithm, or mobile app, rather than be victimized by innovation. That’s why some 3,800 people from all areas of the legacy insurance industry and expanding InsurTech field converged in Las Vegas for this conference—to hear what their competitors are up to, see with their own eyes what kinds of solutions are available or on the drawing board, as well as meet face to face and talk deals.

There are lots of shiny, new toys for insurers to play with, such as facial analysis for accelerated life insurance underwriting, artificial intelligence to bring virtual assistants to life, drones to help assess claims, and blockchain to back smart contracts. But beyond the emergence of new tech tools, a more fundamental shift is underway that could alter the very nature of insurance. Tech companies may not displace legacy insurers anytime soon, as once was feared, but InsurTech will likely be required to reinvent how carriers do business and remain competitive. The conference featured multiple discussions about how:

  • Data sources are becoming more transparent, and data itself more of a commodity rather than a precious, scarce resource. The differentiator will be what insurers can do with all the new data they are collecting, depending on the analytics and models they apply to come up with actionable results. Can insurers drink from the deepening well of data and convert all that information into something not just useful, but truly transformative?
  • Insurance policies will become proactive, rather than remain reactive. Instead of passive contracts offering after-the-fact coverage for losses, carriers and their InsurTech partners will look to control risk factors in real time—activating or shutting down sprinklers, turning on the heat, monitoring video surveillance, or automatically pulling a sensor-equipped car with mechanical problems to the side of the road. This is much more intimate and interactive than the traditional, transactional, arm’s length relationship to which insurers are accustomed.
  • InsurTech will facilitate more frequent as well as more positive engagement with consumers. One speaker characterized today’s customer-insurer relationship as akin to a trip to the dentist, interacting only when you have to—usually just once a year for a renewal checkup. That is, unless a loss occurs, which may turn out to be an unpleasant experience if claims are disputed, and perhaps even denied. The question is whether insurers can leverage technology to create a “toothbrush experience,” where they engage regularly and routinely to keep the worst from happening, rather than only respond after a loss, thanks in large part to the power of connectivity.

Insurers and InsurTechs approached transformation not as erecting impenetrable fortresses single-handedly, but as a team exercise to build mutually beneficial partnerships, to the ultimate benefit of consumers.

InsurTechs and incumbents: A new dynamic

Looking at the bigger picture, one could clearly see a new dynamic in action at the conference. Insurance veterans of the pre-digital age appeared to mix rather seamlessly with ponytailed tech startup founders. On hand to help with introductions was a growing army of intermediaries—accelerators and incubators scouting the frontier for viable startups, trying to cull the herd by separating hype from reality, and ultimately facilitating deals between the old and new worlds of insurance. Outside investors were also on the prowl, including venture capitalists and private equity firms. It was a microcosm of the emerging insurance ecosystem come to life, far more diverse in terms of the skill sets, capabilities, expectations, culture, and personalities on display.

The insurers I encountered seemed confident that the new breed wouldn’t be running them out of business anytime soon. They were intent on leveraging what InsurTechs had to offer to cut expenses, improve customer experience, and bolster their top and bottom lines. Meanwhile, the InsurTech pioneers on hand spoke about insurers as prospective clients, investors, and acquirers, rather than as old-school competitors ripe for displacement. Both approached transformation not as erecting impenetrable fortresses single-handedly, but as a team exercise to build mutually beneficial partnerships, to the ultimate benefit of consumers.

That’s not to suggest that InsurTechs and incumbents won’t lock horns here and there, or that a game-changing disruptor will not suddenly loom on the horizon. But speakers from both the legacy and startup sides emphasized this doesn’t have to be a zero-sum game or winner-take-all confrontation for the vast majority of players. Each spoke candidly about how they might help the other navigate the turbulent waters ahead.

When the conference ended, I found it quite remarkable to have seen so many intriguing InsurTechs under one roof, led by brilliant and daring entrepreneurs. But I was even more impressed to see tech-savvy legacy insurers holding their own in such a cutting-edge crowd. In time, I expect the lines between this symbiotic pair to blur as insurers and InsurTechs become joined at the hip, neither able to survive nor prosper without the other’s support.


QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The views expressed in this blog are those of the blogger and not official statements by Deloitte or any of its affiliates or member firms.

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