How insurance carriers can embrace insurtech startups

The speed of change in the 300-year-old insurance industry is constantly increasing, and technology is the primary driving force. To keep up, carriers must embrace new ways of doing business so that they can better meet the needs of their expanding and evolving customer bases. One way of doing so is by embracing insurtech startups.

According to a 2017 report from PricewaterhouseCoopers discussing insurtech and the innovations this technology is bringing to the insurance industry, “It’s no longer a question of whether or not [carriers] are involved with insurtech; rather, it is about how they leverage the insurtech ecosystem.”

Instead of viewing emerging insurtech companies as threats seeking to disrupt the insurance industry, carriers must begin to see them as an economic opportunity. The challenge is how to best take advantage of this opportunity.

The rise of insurtech startups

In 2016, global insurtech investments totaled $1.7 billion, with both the volume and number of deals roughly doubling compared to 2014. Clearly, insurtech is a global force to be reckoned with. With more than half of these investments being made in the U.S., carriers in this country have relatively more insurtech options to explore.

How to embrace insurtech startups

Here at WeGoLook, we understand the challenges that carriers face when embracing insurtech startups and integrating them into their businesses. That’s because we were once a startup serving the insurance industry.

In 2017, Atlanta-based Crawford & Co., the world's largest independent provider of claims management solutions to insurance companies, acquired WeGoLook. They did so because they recognized that WeGoLook empowers them to automate and expedite the claims handling process by utilizing a large mobile workforce for automotive and property inspections. This deal makes sense because it leverages the strengths of both organizations. Additionally, this deal works because Crawford & Co. embraced insurtech before they embraced WeGoLook.

Based on the findings of industry observers, here are some of the best practices carriers can follow when seeking to invest in or acquire an insurtech startup.

Understand your organization’s needs – No carrier should seek out an insurtech startup just for the sake of doing so. That would be a waste of everyone’s time and resources. Instead, the carrier must have a plan. And, to have a plan, the leadership of the carrier must understand their organization’s needs.

To get the most out of insurtech, carriers must be sure about their current strategy and how an insurtech company fits within that strategy. Additionally, it’s important to consider just how far along the organization is in terms of following that strategy before making attempts to integrate an insurtech startup into that strategy.

Determine whether it’s best to develop a solution, partner with an insurtech company, or acquire an insurtech company – There are three tactics to achieving a strategy for innovation; build, partner, or buy.

Of course, the carrier can launch an insurtech initiative on its own. This involves more than investing in resources and talent. For the initiative to be successful, the carrier must also learn about the insurtech they are attempting to implement. Building may be the best option if the carrier wants total control of the project. However, building takes time and has a relatively high possibility of the project being derailed due to mistakes caused by lack of knowledge.

The second option is partnering with an insurtech startup to help the carrier reach its goal. One important drawback to partnering is that the carrier has to share decision making and control with the startup.The startup has the technology and the know-how, so they should be at the table when the organization makes decisions.

The third option is to acquire the insurtech startup. This is arguably the fastest way for a carrier to gain the expertise they are seeking. If the carrier is able to integrate the startup so that the carrier can fully leverage the startup’s technological expertise, then this tactic will be advantageous.

Get buy-in at the executive level – The person in charge of leading the technology innovation at the carrier is likely to be the person who has taken the lead on the initial steps towards embracing an insurtech startup. Now, the next step in their process must be getting buy-in at the executive level. They must put together a watertight argument for why it is beneficial to bring the insurtech startup on board and how it can best be accomplished.

Build a project team – At this stage, it is time for the carrier to dedicate both personnel and financial resources to the initiative. The project team will lead the initiative and must have the authority to meet and negotiate with the targeted startup.

Understand cultural nuances – As you can imagine, the culture at a startup is drastically different from the culture at an insurance carrier. Depending on how the carrier manages the project, the cultural differences can be a problem or a growth opportunity for both parties.Part of the value that comes from working strategically with an insurtech startup is the startup’s agility, creativity, and their willingness to take risks. The startup’s unique culture is exactly what enables them to create the traits that the carrier is looking to acquire.

Final thoughts

Recognizing that the lives of their customers are being transformed by new technologies, carriers must also recognize that that technology is transforming the insurance industry. And, thanks to insurtech startups, insurance-related technology is advancing at an exponential rate. This means carriers must innovate at an increasingly rapid pace to maintain a competitive edge.

Fortunately, a growing number of carriers are beginning to see that insurtech represents an opportunity rather than a threat. This acknowledgment means that they will search for collaboration opportunities with technology-fueled startups.

However, simply investing in or acquiring insurtech startups is not enough. Carriers must have a supportive corporate culture, a clear innovation strategy, and dedicated funding for their initiatives to truly integrate the value of insurtech partners.