How insurer-insurtech partnerships define the insurance industry
In 2017, more than half of the global insurers were feeling the heat of competition from insurtech firms in a rapidly digitising world.
These insurers, surveyed by PwC, estimated that around 20 per cent of their turnover is threatened by these firms. To counter this “threat”, insurers started becoming proactive and 45 per cent of insurers said they formed a partnership with an insurtech firm.
The threat has now turned into a plethora of opportunities. Insurers started realising the potential of insurtech and now we have several insurers partnering with insurtech firms to leverage the platforms and services of a booming ecosystem of insurtechs.
Recent partnerships in Asia include a collaboration between Singapore insurtech Surer and specialist underwriting firm Delta to provide businesses access to innovative insurance products such as cyber and technology liability insurance.
Insurers are focusing on collaboration with insurtech providers as they look for outside expertise to help them improve sign-up and payout processes, says Sravani Ampabathina, Insurance Analyst at GlobalData.
GlobalData predicts mergers and acquisitions in insurance to increase in the next few years, with insurers and reinsurers investing more in technology partners.
Insurers are partnering insurtech firms for technology in underwriting, pricing risk, incentivising risk reduction and claims payouts alongside other technologies such as image recognition, Ampabathina points out.
There is also a trend of insurers collaborating with companies specialising in telematics; health monitoring and reward programmes; pet health monitoring; and personal and commercial smart home devices.
Benefits of insurer-insurtech partnerships
Strategic partnerships between insurers and insurtechs offer multiple benefits. For one, it enables insurers to better connect with their customers and change their product offers by leveraging innovative technology, shares Eddy Wong, the co-founder and CEO of Vsure. Vsure is a Malaysian insurtech firm working with various insurers.
Partnerships also allow insurtechs and traditional insurers to share their knowledge and experience to increase service personalisation. This is accomplished by leveraging their expertise in client demands and leveraging real-time data from linked devices such as wearables, Wong notes.
Next, strategic partnerships provide insights into risks and allow traditional insurers to base premiums on highly detailed risk assessments through establishing ties with their clients. It also allows for proactive risk reduction services and prompt care interventions.
This is why traditional insurers and InsurTechs will work more closely together than ever before as technology advances quickly and the world enters the era of digitalisation, shares Wong.
He expects a significant increase in collaborations including outsourcing services, pursuing business in different markets, and offering extra services like Islamic financing that complies with Shariah, particularly in Malaysia and Indonesia.
"Insurtech companies will be considered as a strategic go-to-market platform by traditional insurers to inform, involve, and interact with their younger clients," says Wong.
VSure has formed several collaborations with Allianz, AXA Affin, Etiqa, Tune Protect, Gibraltar BSN, RHB Insurance, MCIS Life, HLP, and others. VSure's collaboration with these incumbent insurers is rather extensive on both product co-curation and technology innovations, shares Wong.
He shares that VSure has been engaged in creative partnerships targeted at various markets that have not yet been fully penetrated. The incumbent risk partners do not need to worry about VSure sharing the market demand because it inclusively opens more markets instead of self-cannibalisation, notes Wong.
Emerging opportunities for partnerships
So what lies ahead for insurers and insurtech firms engaging in partnerships? What kind of opportunities will be "up for grabs"?
Of course, there are possibilities for insurtech firms to assist insurers in leveraging innovative and developing technology to engage and reach clients wherever they are, according to Wong.
He points out that insurtechs can provide answers to the difficulties that insurers face in this increasingly competitive and digital sector by using their expertise in modern technologies such as artificial intelligence (AI), the Internet of Things (IoT), blockchain, big data, and analytics.
Ampabathina also forecasts AI, big data, blockchain, cybersecurity, and IoT to be the main trends in the insurtech space over the next 12–24 months, with increasing insurer-insurtech partnerships.
After all, creating workable insights from personal data which can lead to more tailored or personalised and accurate premiums is a key driver behind insurtech.
At the same time, analytics and AI will be the major tech sectors receiving investment with GlobalData forecasting that the total spending on AI platforms will exceed US$52 billion in 2024.
Meanwhile, digital mental health and suicide prevention platforms could see a rise in collaboration with insurers.
“We are seeing more numbers of insurers showing interest and leveraging insurtech to address social issues such as inclusivity and mental health well-being,” says Ampabathina.
Life or health insurers are looking into partnering with digital platforms and care management apps to get an understanding of niche mental healthcare sectors such as suicide prevention, she shares.
This could mean insurtechs specialising in health could leverage this trend to partner with incumbent insurers in this space.