Coronavirus has created an enforced modernization of the insurance industry, with companies left with no option but to allow their staff to work from home, meaning they have required immediate solutions to longer-term problems, such as the need to do business digitally and more efficiently. As carriers struggle to innovate to meet the changing needs of their customers, partnering with insurtechs is often seen as the ideal solution.
When insurance companies team up with insurtechs, you essentially get a two-track approach to success. Insurers and insurtechs are separate organizations with different but complementary skills, meaning these partnerships are rarely straightforward.
On one hand, you have the insurtech innovators who bring fresh thinking to complex problems. On the other hand, you have insurance companies that have decades or more of experience in ensuring complicated risks, and are well-capitalized and used to working in international markets.
How do these two businesses work together successfully so that they make it to the end destination of creating dynamic, financially robust businesses that can deliver real innovative solutions to emerging problems?
What makes a successful partnership?
There are three key aspects that make a successful partnership between insurers and insurtechs. First, there must be clear mutual benefits to both parties, and the relationship must address a need for both the insurer and insurance.
This mutual benefit will ensure buy-in from each party, resulting in both putting in the required time and effort to create a successful outcome. Once you have identified these benefits, the groundwork is laid for cooperation. The whole point of the insurer-insurance partnership is to leverage what each party uniquely brings to the table. This is far more effective than working in silos on the same project, and it provides a forum for a diversity of thought and talent.
Finally, a successful partnership will have a long-term commitment from each company. Committing to a sustained relationship with access to each other’s resources allows the partners to understand each other’s strengths and weaknesses and to leverage these into a more efficient alliance.
What’s in it for insurtechs?
The biggest benefit for insurtechs when partnering with an insurer is the access it provides. If you are building a tech solution for the insurance market, you need to have strong lines of communication with the people you are building it for. What is the point in creating a product nobody needs?
This access can also provide fertile grounds for proofs of concept (POC’s) and pilots that are not only vital in proving that the insurtech solution has legs, but it is also a key part of the development process.
The value of associating your start-up company with a well-known and well-respected brand cannot be stressed too much either. The insurance industry is often very reputation based, and as such, the value of being associated with a renowned name within the market can open a lot of doors that would otherwise be shut.
Finally, partnering with an incumbent creates a great deal of value for insurtechs when developing their products. As organizations that are often dealing with similar pain points and similar clients, there can be obvious areas for collaboration. It could be improving the quality of both insurer and insurance products through a complementary application programming interface (API) integration, allowing users to flow from one solution to the other. Or it could be as simple as getting access to the insurer’s contacts to efficiently reach the right person, rather than getting bounced around numerous departments before getting to the correct person.
What’s in it for insurers?
By partnering with insurtechs, insurers are able to continually progress and modernize to meet the changing needs of their clients. As an industry, this is essential so that the insurance market can remain relevant and competitive - which has been underscored by COVID-19. The unprecedented world we now find ourselves in means companies have to innovate or they will get left behind.
Insurtechs are nimble compared to incumbents, allowing them the freedom to adapt their offering to the ever-changing wider environment. What is new and innovative today will not be ground-breaking next month. By partnering with insurtech’s, insurers get access to this freedom to create bespoke, niche products quickly to match customer needs. This will ensure they stay competitive in a market where new products are being launched every day.
Insurtechs are absolute experts in what they do or the solution they provide. Due to the intense focus of the company, insurtechs can offer insight and expertise that directly address the insurer’s needs. Too often, insurance companies set up internal taskforces to find solutions to their problems, which in practice often means that employees are performing two roles, resulting in their focus being split. Instead, by partnering with an Insurtech, insurers have a ready-made team whose sole focus is on innovation.
Conclusion
As the market has become less technophobic and the insurtech space has become more established, there has been a real shift in the view of both the insurers and the insurtechs. Today, there are more high-quality insurtechs, and there is a growing trend of senior insurance figures migrating to the insurtech space.
COVID-19 has also forced modernization on the market, and as such, those who were typically opposed to modernizing are seeing first-hand the need for digital - and recognition that insurtechs are best placed to assist them.
While these partnerships are never easy, the collaborative approach is essential. The insurance industry was born 300 years ago as an innovative way to enable international commerce and to keep enabling their customers for the next 300 years, the market is going to need to embrace that creativity.