Disruption: Connectivity will be the tipping point

Insurance is a US$4.5 trillion-a-year global industry! A headline number that engages the interest of investors and entrepreneurs from all backgrounds, acting as “a unicorn magnet” according to CB Insights.

Couple this financial opportunity with low consumer trust in the “Insurance” and “Financial Advisory” sectors, along with incumbent insurers who, despite their best intentions, cannot deliver the experience that the connected consumer wants. It is no wonder that investment in InsurTech reached an all-time high of $2.6 billion across 118 deals in 2015.

Fragmented investments in isolated solutions

In aggregate, this global InsurTech industry investment appears to be a large number. But when put into the context of the investments individual incumbent insurers have made in traditional channels, it is a drop in the ocean. Manulife alone, invested $1.2 billion in a bancassurance distribution deal with DBS in Asia in 2015.

These 118 InsurTech deals are also fragmented across product lines, the client journey and distribution channels. In the recent Who-is-Who of InsurTech for Hong Kong and Singapore, a total of 39 startups were identified, each focused on a very small niche of those markets’ combined $57 billion insurance industries. The list includes 10 aggregators, five IoT/HealthTech services, and three lead generators. Other startups provide services that can take friction out of steps in the process, such as a blockchain-based KYC service, or data analytics to facilitate product recommendations for existing clients.

Individually, although these startups can improve parts of the process, none seen so far are likely to disrupt this mammoth industry.

This is because their impact is localised at the intersection of several dimensions and therefore, they are only addressing one of many pain points for any particular client category. For example, an aggregator may help a client find the insurance they want at the lowest price or best value for money. However, the aggregator usually does not help the client to understand what they need in the first place. And then invariably, once the client clicks the button to buy, they are faced with downloading and completing a paper form, or told that an agent will contact them.

But collectively, startups will influence consumer expectations, provide new ideas and technologies, and force insurers to innovate and adapt incrementally although below the continually rising bar of client expectations.

Dependence on incumbents

One full-stack motor insurer on the Who-Is-Who list is an exception to the majority of related startups which rely on partnering in some way with existing insurers, rather than competing with them. Yet, partnering does not come naturally to incumbent insurance companies. Internal politics, fragmented accountabilities, and torturous approval processes mean that startups risk running out of runway before gaining traction with insurers.

Even those startups who are incubated by the insurers themselves face challenges. A leading insurer admitted that they struggled to integrate, commercialise and industrialise the technologies built by startups in their accelerators.

Insurers cannot digest new technologies at the rate that they are emerging. Big Data is old news in most industries, and yet few insurers have figured out how to integrate the insights and action items derived from the wealth of data they have into each and every client interaction. How much harder it is for them to incorporate even newer and more focused technologies into their existing manually intensive processes and monolithic legacy systems.

Connective tissue

While startups may have unique and creative solutions to a specific, localised intersection of the insurance experience, the overall client journey is still disconnected, with the consumer having to provide the same information to each player they engage with on their journey.

When startups begin to combine their forces, connecting the discrete steps in the journey, and collectively owning more of the client experience, their negotiating position relative to existing insurers will improve, and their disruptive potential will increase.

Startups may combine in different ways. Old fashioned M&A is just one. Although, until a few startups mature and have the funds to make acquisitions, it is more likely that mergers between like-minded founders will predominate. Yet, that might make their business proposition more complicated for investors to understand.

Another approach for startups to co-operate is to evolve a common set of APIs that will allow related entities to seamlessly hand off clients across each step in the journey.

For example, if PolicyPal could provide Seasonalife with the client’s current portfolio, Seasonalife could calculate a client’s insurance needs which could then populate GoBear’s comparison engine with the client’s insurance requirements. To close the loop of course, once a purchase is made, the insurer should provide an API for updating the client’s portfolio on PolicyPal with the new policy’s details – good for the client, but not high on the priority list of insurers.

An alternate approach is for all players to participate in a platform that is organised around the client and that serves as the connective tissue, providing a middleware layer for messaging and data integration; one that digitally enables distributors of all kinds to interact with insurers, reinsurers, and the various data and technology innovations in the insurance and, more general, consumer space.

It will only take one forward-thinking incumbent or new insurer to see the advantage of participating in this new ecosystem. At that stage, the end-to-end digital client journey will be complete and the gravitational pull of this new ecosystem will become irresistible to clients, and hard for insurers to ignore — amplifying the impact of the investments made in InsurTech.


Startups must address the particular pain point they are focused on with consideration to the context of the entire client journey. In this new ecosystem, the winners will be those companies that are willing and able to co-operate within the ecosystem. They will provide the seamless digital process across the entire client journey for all categories of insurance that a client requires as their needs evolve.

The pieces of this complex puzzle are in place today. What is needed is a way to connect them together. When that happens, insurance disruption will have reached its tipping point.

Originally Published in Asia Insurance Review 1 May 2017

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