InsurTech – Putting on its Grown-Up Pants

'Now what?'

Editor’s Note. This is a guest post by Patrick Kelahan who we first introduced to the Daily Fintech community via this interview.

Like the idealistic university student who has matriculated and is now out to conquer the world, InsurTech is realizing that at some point talk is cheap, and the rent has come due.  In its (length depending on whom you ask) three to four to five to nine year tenure, the innovation impetus within the insurance world AKA InsurTech has evolved from an oddity of peer to peer cover, to strident disruptive movement, to the focus of endless conferences, to catching venture capitalists’ attention, to innovation incubators, to – well through the path of evolution of most start-up business models.  That is, except for a few steps: the general acceptance by the industry’s customers, and in proving an independent, sustainable profit from innovative operations.

As such the movement has in many respects run out of idealism and its allowance, and is looking to engage those who have been reminding the ‘students’ all along that disruption for disruption’s sake is misspent effort, that there are rules that must be followed, that some ideas are clever but impractical, and that if they would like, there is an established insurance industry that is ready to embrace the prodigals.

Of course, partnering with incumbent, or legacy, insurance stakeholders (can’t say just carriers, as agents, brokers, MGAs, TPAs, vendors, consultants, etc. are apt partners as well) has its challenges of perspective as well.  In many respects innovation efforts to date have focused on the expense portion of the business, have not made significant inroads into improving claim service (as seen by the customers), have spoken of prevention (IoT, etc.), but have not made anything close to seismic changes on claim severity or service. 

Customers still have little concept of what comes next when a claim service is needed, process redesigns are made but become mired in the morass of organizational culture, and intellectual capital continues to bleed from claim staff ranks. 

There are many success stories to be considered in all insurance covers, but considering the industry is a US $5 trillion annual business and InsurTech efforts can be measured only in tens of billions of dollars, the effect is not yet significant.

And importantly- while InsurTech is the discussion du jour among the industry, that discussion has yet to really address the risk management needs of the 3.5 billion persons in markets who are not served or are underserved in terms of insurance products.

Current InsurTech focus does remind one of the Elephant and the Six Blind men- many innovators ‘seeing’ the industry from the perspective of what each participant respectively touches, and each in great part not seeing the beast for what it is- a complex combination of all its parts, and a complex interplay of the industry’s customers.

There is much to discuss and highlight regarding InsurTech, insurance, and customer service, not only on a niche basis (of which there are many), but on a global basis (literal and figurative).  I look forward to investigating and discussing the many unique areas of insurance while keeping a big picture perspective.  The elephant must be seen, but it’s OK to focus on its parts- and going forward this will include but not be limited to discussion of:

  • Customer understanding and acceptance of industry change
  • Claim processing- where method must resist madness
  • Digital methods’ effect on innovation, service, and development of new products
  • Effects of climate change on catastrophe insurance products
  • Regulation
  • Market growth where legacy barriers were not present- can that be mimicked in mature markets?
  • Comparisons and contrasts on how insurance is perceived globally

And in turn, it will be interesting to observe how InsurTech ‘graduates’ are working to pull on their adult trousers.

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Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is the author of The Blockchain Economy and CEO of Daily Fintech.

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