Insurance Organisations & Insurtech… Collaboration, Investment or Acquisition?

At the European Digital Insurance Summit I was facilitator of think tank sessions concerning the topic 'Insurance Organisations & Insurtech… Collaboration, Investment or Acquisition?".

As I've been asked about the results of this think tank several times I've written down some key take aways and observations from these sessions below. Before I go into more detail I can immediately state the obvious: there is not a clear answer as the ideal solution depends on each specific situation and the solution that is being looked for. So if you're looking for a clear answer this piece won't be of any help, if you're interested in experiences in this field do read on.

First some general thoughts about insurtech

• Interesting observation in my opinion was the thought that current insurtech companies might end up selling their technical solution to incumbents, thereby completely refocusing their attention to from B2C to becoming a technical platform. This change in focus can be caused due to a possible lack of traction while having developed a solution that could also be beneficial to corporates.  Another reason could be that it takes a long time for an insurtech to become profitable and it is to be seen whether investors are that patient. Selling their technology could provide an income.

current insurtech companies might end up selling their technical solution to incumbents

• Some insurtech firms could be too narrow focused – they offer an excellent solution to something the customer experiences as a partial solution to his insurance need. How much of those partial solutions a customer is willing to have is uncertain.
• An interesting aspect about insurtech solutions is that they are often started by people that don’t necessarily have a background in insurance. Thereby people from different backgrounds with different ideas look at the same problem, but do come up with different solutions as a result. These outcomes and way of thinking could be beneficial to a traditional insurer as well.
• On the other hand the in-depth insurance and regulatory knowledge of a traditional insurer might come in handy to an insurtech that lacks this knowledge which could be a basis for a collaboration.
• Overall people agreed that insurtech will have an impact on the market as a whole as the insurtech approach to the market and way of interacting with customers will change the customer behavior/needs in general. This will have an effect on traditional insurers as well as they will need to adapt to the changed customer expectations.

insurtech will have an impact on the market as a whole as the insurtech approach to the market and way of interacting with customers will change the customer behavior/needs in general

Search and inspiration

Before you can think about collaboration, investment or acquisition you need to find a potential insurtech first that really matches the need of a corporate. This can be a long process; “you have to kiss many frogs to find a prince”. Interesting remark was the following: do look outside the insurance industry for inspiration, look at what non-insurance companies are doing with telematics, artificial intelligence/machine learning and define quick wins for your own company based on those findings.

A partnership with an accelerator does also provide access to startups. The additional benefit of partnering with an incubators/accelerators is that they serve as a kind of due diligence. If a startup qualifies as participant they’ve passed the pre-selection criteria, this provides more certainty on the quality of the startup. It is still no guarantee of course.

Some (re)insurers do offer their own accelerator program; the qualification process to that program ensures that only relevant startups enter the program. Collaboration out of such a program is then a more natural step.

do look outside the insurance industry for inspiration, look at what non-insurance companies are doing with telematics, artificial intelligence/machine learning

If doing business is a possibility do take into account the following deal breakers

• The willingness to decide quickly from the corporate side is essential. Corporate decision making time is a dealbreaker for a startup. Take into account that when talking to a corporate the survival of the startup could actually be at stake. Since a startup might only have 6 months left of funding. This kind of pressure differs from corporate life.
• Also keep in mind that startups do not have the manpower of budget to reply to an RFP, it does require taking people out of the operation and that has an immediate effect on the overall performance and progress of the insurtech.
• Insurtechs mentioned that they observed that they needed many people in a corporate in order to come to a decision. There aren’t many people that overview a whole process or have a mandate to do so, most people are working/responsible for an specific “island” rather than the whole journey. It takes a long time to get to the appropriate person that can really decide on a way forward. Talking the wrong person is costly for a startup. One of the incumbents introduced a kind of internal account manager – one touchpoint for startups who makes sure the right people are being involved. This is also a recommendation of the COSTA program (see last paragraph); appoint a startup liaison officer that is the primary contact person for startups and communicate the name of this person on the site of the corporate.

Partnering versus investing

• A good approach does seem to be: partner first and invest later as an incumbent gets a better idea of the insurtech and what they can mean for their business this way. Does the collaboration work well investment could be a logical next step.
• Want to know if consumers are open to a new kind of insurance, telematics of other solution, via a partnership with an insurtech this can relatively easy and affordable be validated with customers.
• If the goal is to change corporate culture start a collaboration with a startup, don’t acquire one!

About acquiring an insurtech...

• Reinsurers do invest in and acquire startups, so does Goolge (Lemonade, Oscar, ...), however only a few incumbents stated that they actually acquire startups, they prefer collaborations
• Acquisition only makes sense if an insurer does make massive leverage on the acquisition. Therefore acquire only if you have a clear scope; be sure in advance what you want to get out of the acquisition and how you plan to integrate the startup in the corporate before acquiring an insurech.
• Before acquiring an insurtech do use metrics and sandboxing to validate that it can provide the required solution
• Acquisitions don’t work if you kill the culture.  Therefore do not integrate the startup too much after the acquisition! Talent will leave due to the culture change.

Collaborations among corporates and startups - COSTA

In the Netherlands a program ran about cooperation between COrporates and STArtups - COSTA. Several corporates looked at ways to improve the collaboration with startups and carried out numerous use cases in this field. Based on the experiences in the program a readiness assessment has been created to see how ready a corporate is to collaborate with a startup.

More information can be found at readytoteamup.com. However: do keep in mind that it has been developed with the Dutch market in mind, though the corporates that participated are all multinationals. Next step is to create a readiness assessment to determine if a startup is ready to collaborate with a corporate.

There are most probably lots more considerations to make, however I based the content of this piece on the actual discussions.