After eleven weeks of chronicling discernible trends and dominant movers in insurtech, I have barely scratched the surface of major shifts the $5 trillion global insurance industry is embarking upon. Meantime, I have covered upstart unicorns, innovating incumbents and those in between. The period saw more press go to extol virtues of the booming insurtech space, what with an IPO and few more that announced plans. It also saw the culmination of a major presidential race, with decidedly some impact on the course the sector might take.
In my introductory article “Elusive Sweet Spots”, I unequivocally subscribed to the notion that winners far from being standalone innovators, work closely with other organizations and ecosystem players. With every week, business line and area covered, it became clearer that partnerships and ecosystems were the preferred route. Thus, it would be little surprise to the reader when I reported that Tokio Marine strategized to go with Tractable or that Lloyds of London collaborated with its entirety of syndicates. Both startups and legacy providers realize they gain from combining the former’s tech with the latter’s customer knowledge, risk understanding and capital strength.
We came across Professor Robert Shiller saying, “Radical innovation requires serious experimentation, serious effort to find the precise form of financial or insurance structure that performs well, serious effort to educate about new risk management tools and an involvement with other institutions and thought leaders to make the variety of changes possible to make the innovation succeed.” When later I wrote about Root Insurance’s IPO, it was no wonder there was tremendous effort involved in perfecting algorithms for its telematics as business grew and it had access to lot more customer behavior data. Building moats is grueling, as the telematics evolution at Root attests.
In “Ecosystem Rush“, Bill Song, COO of Zhong An was quoted, “We cannot compete with giants like Google. They understand the customer much better. They dominate the traffic. They will just let the insurance company bear the risk, if we don’t change. We can try to digitalize ourselves and set up new kinds of relationships through ecosystems.” This trend was amply visible in examples of Navi’s DHFL GI and PayTm’s Raheja QBE acquisitions as tech majors in adjacent markets build up positions in insurance and insurtechs become full stack carriers. Similarly, Tesla’s foray into auto insurance on the back of its autonomous mobility play was brought to bear in “Mobility Giants”.
I presented examples of innovation in core insurance areas of parametric coverage and insurance linked securities. While richer data helped Swiss Re’s Pop Storm offer parametric hurricane cover that is triggered based on precise wind speeds, new forms of risk were lapped up by the alternative ILS market. Innovation in other markets such as in mobility and healthcare is influencing the development of the insurance market. Whether it is AVs or micro-mobility solutions, insurance takes a key stake. In healthcare, cost inflation curtailment and digital health advances are increasingly piggybacking on insurance to inch forward.
The need to be smart with data and leverage intelligent tech was a recurrent theme. Be it startups in Asia or larger global players like MS&AD, there was a flurry of activity to get the data and AI houses in order. Last week, we saw the scale of endeavor a centuries old marketplace like Lloyds needs to become digital.
While these themes keep evolving and accelerating, the expectation is legislation will continue to play a major role, such as from the change of guard in the US. Be it from a refined focus on climate change or the narrative turning to risk based pricing, the insurance industry will keenly watch how this unfolds.
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