Insurance coverage firms need to invest in insurtechs, Gartner says

CHENNAI: Insurance coverage sector CIOs need to expand their industry insight regarding the innovation and disruption potential of insurance coverage technology startups (insurtechs) to complement their digital insurance coverage approaches, as outlined by Gartner.
Gartner says 64%
of the world's 25 largest insurance firms have already invested right or indirectly through their venture capital arms in insurtech startups.
Gartner predicts that 80% of
lifestyle and home & casualty (P&C) insurers worldwide will partner with or acquire insurtechs to secure their competitive positions by the end of 2018.
Speaking at Gartner Symposium/ITxpo in Australia on Monday, Juergen Weiss, a managing vice-president at Gartner, said insurtechs can stimulate or accelerate innovation among incumbent industry players and complement existing digital
insurance techniques.
"Gartner has seen a growing interest among
insurance coverage business and IT leaders in collaborating with insurtechs or making them part of their overall innovation policies, but research has found that most insurance coverage CIOs are not familiar with these organizations or their value propositions," said Weiss.
"We advise CIOs to identify areas where insurtechs could complement their digital
insurance coverage methods, and evaluate possible collaboration or investments," he said.
Gartner defines insurtechs as
technological innovation firms (1) that are at their early stages of operation; (2) that drive specific innovation across the insurance value chain by leveraging new technologies, user interfaces, business processes or business models; and (3) that leverage different forms of funding, including, but not limited to, venture capital.
The number of
technologies startups in the insurance industry has more than doubled globally during the last three years, in line with Gartner analysis with the sector conducted in the second quarter of 2016. Digital customer engagement, mobile insurance coverage management and analytics are the most common technology focus areas of insurtechs.
Around 60% of insurtechs have been founded within the last three years, and two-thirds of them have their headquarters in the US EMEA is the second-most important region for insurtechs, with 27% having their headquarters there, mainly in Germany and the UK.
In Asia, countries such as Singapore and China (mainly Hong Kong and Shanghai) have begun to promote the development of a local insurtech ecosystem.
Digitalization is one
on the top priorities for insurance coverage CIOs, based on Gartner surveys. However, the vast majority of insurance CIOs are still struggling to progress their digital strategies.
Gartner's research indicates that only 12% of
insurance business and IT leaders consider their organisations to be digitally progressive, while the majority believe that their organisations are digital beginners or intermediate, at best. Reasons for this include a lack of agility caused by legacy IT systems, flat IT budgets and a lack with the right skills or the delivery models to support innovative business models.

"Collaborating with insurtechs, or at least evaluating them, could therefore provide a number of
possible benefits for insurers," said Weiss.Based on Gartner, insurers have six main options to capitalise on the opportunities that insurtechs provide:
1. Partner (for example, Axa partnering with BlaBlaCar for carsharing).
2. Acquire, that is, purchase the intellectual assets and hire all resources of an insurtech.
3. Purchase (like one would buy
technological innovation from an incumbent vendor such as SAP).
4. Invest (obtain a minority or majority share, either
straight or indirectly, via a VC arm, such as Allianz's investment in Simplesurance).
5. Incubate (for example, let insurtechs compete to get into a startup accelerator; mentor them; and give them a space to work and exchange ideas).
6. Insure the operations or assets of insurtechs.
Insurance CIOs who are planning to partner with insurtechs also really need to be aware with the risks.
"Not all of them will survive," said Weiss. "Insurance CIOs will
have to develop a fail-fast approach and an exit plan that secures intellectual home and critical resources," he added.
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