Five InsureTech Connect 2021 Themes
After going virtual in 2020, InsureTech Connect (ITC), the world’s largest gathering of insurance industry professionals, returned in person to Las Vegas this year. The exhibition halls were filled with more than 5,000 attendees representing a wide range of the insurance industry, including investors, insurance start-ups, solution providers, brokers, distributors and established carriers.
As we chatted with clients, listened to expert panelists, and walked from stand to stand, a number of discussion themes emerged that had exciting implications for incumbents and start-ups:
- 1. Discuss the risk-return balance in emerging and specialized risks. The industry is paying more attention to emerging and specialist risks, from cyber (as seen in some big news this week) to sports for kids in Kindergarten to Grade 12. A range of early arrivals is in sight. On the one hand, managing general agent (MGA) start-ups strive to establish a track record of properly pricing specialist risk and avoid overexposure in the event of a major loss. On the other hand, some incumbents are reducing their capacity while trying to compensate for this by using data and analytics to make sophisticated investments in a wider variety of technical and analytical products and services.
- 2. Assemble the most efficient underwriting and claims analytics and workflows. We were struck by the ever-increasing number of ad hoc underwriting and claims solutions. As an example, we have seen many new real estate intelligence firms that use images and other data to develop real estate risk information. In the past, homeowners and small insurance companies were thought to be slow to innovate. Today, home insurance is undergoing rapid changes and may even be ahead of other lines. In claims, consumers can now use technologies provided by their carriers to capture images of a loss, automatically share them with the carrier, and receive payment faster. Yet it is not yet clear to what extent carriers will assemble the solutions offered by these innovators into a connected subscription and complaint flow or how investors will seek to assemble a platform to resell them.
- 3. Take sides in a software patching battle. Several large companies that offer software for essential business functions, such as accounting, marketing and sales, stood out for their presence at ITC 2021. No doubt attracted by the growing investment in insurtechs , these “horizontal” software players see an opportunity in the persistent use of manual processes by insurers. Can these players use their cross-industry perspectives to beat smaller insurance-focused software specialists? Time will tell us. As competition intensifies, we expect some consolidation. One thing is certain: the winners here will be consumers and insurers, who can expect innovations in the customer experience and increasingly fluid processes.
- 4. Harness the power of low code and no code for business innovation. Now more than ever, sales teams can innovate without developing significant custom code from internal IT teams. ITC 2021 showcased a number of low-code and no-code assurance-focused platforms that teams can use to quickly build solutions to suit their workflow using flexible templates. Decentralizing the design and build process and using functional teams can dramatically accelerate innovation and improve both experience and efficiency. On the other hand, with this opportunity comes challenges: IT organizations need to think about how to take ownership of the platform, but not necessarily the ultimate end product.
One thing is certain: the winners here will be consumers and insurers, who can expect innovations in the customer experience and increasingly fluid processes.
- 5. Extend parametric insurance solutions. Numerous panels presented innovations in product design centered on parametric insurance solutions. For the unknown, a parametric insurance policy pays a predetermined amount when a calamity such as a flood or earthquake exceeds a measurable threshold (for example, wind speed or precipitation). The savings on the expense ratio side can be significant, but large-scale offerings require carriers to take a close look at geographic diversification and exposure. Given the bi-coastal concentration of risk in the United States, careful design and underwriting would be critical to the viability of the product.
We left ITC inspired and excited about the year ahead. While 2021 was another record year for new capital invested in insurtechs, we’ve also seen many insurtechs experience a drop in valuation after going public. To date, few or no insurtechs have hit the financial performance of the main incumbents. However, we were struck by the confidence attackers have in their ability to bridge the gap not only by leveraging modern technology stacks and using more analytics, but also by innovating the commodity offering.
2022 promises to be a year of refined appetite for specialist risk, innovative product design, and internal operations and IT transformation. Opportunities abound for insurtechs and carriers interested in disruption, partnership and acquisition. We are already looking forward to ITC 2022.
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