The Freshfields insurtech team attended the Insurtech Insights Europe 2023 event in London last week and the messaging was clear - the insurtech space needs to be trendy, innovative, exciting and growing. Growth and innovation are key. We’ll let the reader decide how far away we are from this target.
We explore four key takeaways / themes from the event:
- Ability to attract talent – one of the key reasons for making the insurtech (and insurance) sector more “touchable, real, personal and exciting” (in the words of Inga Beale as part of her opening keynote address) is to attract more tech savvy and ambitious talent into the sector. Insurtech has a huge role to play in attracting this talent owing to its appeal being at the cutting edge of the industry. The hope is that, by drawing in a different genre of voices and diversity of thought, the entire insurance value chain will benefit. Historically, insurers have been generally cautious in their approach to new products, new ways of working and new ideas for variety of good reasons, including the heavily regulated nature of the sector. This has led to a fear of failure. There is now seemingly an industry-wide shift in view that some level of failure is acceptable, even necessary, for the insurance industry to keep pace with the digitalisation era, particularly if BigTech comes to play seriously (more on that in our next blog post).
- Cultural integration – closely linked to the point above, both in terms of attracting and retaining tech savvy people and the threat of BigTech, is the difficulty the insurance industry faces with cultural integration of insurtech businesses into larger insurance groups. There are fewer examples of large insurers making a success of buying and integrating an insurtech business, yet large companies in other sectors (particularly BigTech) seem more capable of doing this. Why is this? A principal reason discussed was the difficulty faced with cultural integration – suits vs t-shirts. This is not an easy problem to fix. The main learnings discussed revolved around giving insurtechs and their “move quick and break things” style a clear runway to be able to integrate – i.e. do not expect it to happen quickly. There is the need to give the insurtech and the large insurer time to understand each other and work out ways to collaborate and learn from each other. There were interesting discussions around how the legacy systems of established insurers would need to be overhauled in order that they might be better placed to function alongside insurtechs who operate in the market without such burden. Overcoming the challenge of preserving legacy systems and long standing operational services whilst also modernising in order to keep pace with the changing speed of insurance will be key to the success of any cultural integration.
- Data – is there a need for new data or the need to restructure the abundance of data that exists? In short, yes. Questions exist around the ability of insurers to leverage data in a cost-effective and targeted way and whether the data accumulated actually reflects the risks that exist now – eco, political and cyber for example. The complexity around these questions, together with the time spent by underwriters “looking in the rearview mirror” is also indicative of the need to modernise, to restructure and to look at alternative means of gathering data.
- Risk gap / risk management – in many ways this felt like a call to arms for the industry. The strong message was that the insurance industry should respond to new risks faced by society, and not the government (as is the case with flood, terrorism etc). The industry should not say that a risk is too big - it needs to find solutions to modern (often digital) issues such as cyber. Given that insurance talks a big game - “no plane in the sky without insurance” - it needs to back this up with action by identifying and protecting risk gaps. Actions may include more risk prevention measures (e.g. tech in homes), and there is still plenty of opportunity to explore in the risk prevention area. This call to arms did appreciate and acknowledge that the sector is heavily regulated, but the proposition was that this should not prevent the sector being bold. Bigger, bolder, braver. One suggestion was to replace the word “insurance” and instead focus on “protection” or similar with a view to the product directly appealing to what the customer wants.
The insurance sector almost certainly still needs a shake-up and there are plenty of insurtechs, individuals and advisers out there trying to do just that. Change is inevitable and only a matter of time.