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RISE OF
INSURTECH
THE RISE OF
ACCENTURE
INSURTECH
HOW YOUNG
STARTUPS
AND A MATURE
INDUSTRY CAN
BRING OUT THE
BEST IN ONE
ANOTHER
ACCENTURE
INTRO
While some of this disruption is traditional insurers are more than 300
undeniably coming from InsurTech, years old, whereas many InsurTechs are
DUC
most traditional insurers still perceive less than 300 days old. This can lead to
their existing competitors as posing the significant challenges and differences
greatest risk of disruption (see Figure 2). surrounding culture, workforce,
TION
As such, there is a growing recognition agility and technology. It can also
among insurers that InsurTech ultimately lead to misconceptions on both sides
represents more of an opportunity than and, occasionally, a lack of common
a threat, and that they should seek to understanding about the size of an
collaborate more closely with this latest opportunity or how best to realise it.
Insurers recognise that the everyday lives breed of technology-fuelled startups.
of their customers are being transformed Accenture’s Technology Vision for These challenges have not prevented
by new technologies. They also recognise Insurance 2016 revealed, for instance, that the number and value of InsurTech
that this transformation is affecting 44 percent of insurers across the world deals from soaring in recent years. But
their own industry, which is undergoing intend to pursue digital initiatives with if both startups and incumbent insurers
an ecosystem disruption caused by startups from the insurance industry over are to extract maximum value from the
technology-driven new entrants and the next two years. And, perhaps more InsurTech scene, changes in mindset and
existing competitors alike. Insurers are interestingly, 31 percent plan to work with approach may be required. There is also
thus facing increasing pressure to evolve startups from outside that industry. a pressing need for insurers to integrate
and reinvent themselves before that their InsurTech approach into their
disruption hits the bottom line But collaboration between old and new broader innovation agendas.
(see Figure 1). is not always straightforward. Some
FIGURE 1 FIGURE 2
INSURERS ARE FACING TRADITIONAL INSURERS
DISRUPTION AND NEED PERCEIVE STARTUPS TO BE
TO EVOLVE QUICKLY LESS OF A THREAT THAN
Data from Accenture’s Technology EXISTING COMPETITORS
Vision for Insurance 2017 Entities viewed by insurers as posing
the greatest risk of disruption to the
insurance industry, 2016
STARTUPS
FROM OUTSIDE
...of insurers agree INSURANCE
that technology is (17%)
87%
no longer advancing
in a linear fashion,
ESTABLISHED
but rather at an COMPANIES
exponential rate WITHIN
INSURANCE
(37%)
...of insurers believe
they must innovate at
INSUR
ACCENTURE
TECH
IS BIG
BUSINESS
And its global reach is expanding
There is a growing recognition across Data from CB Insights reveals that global
the financial services sector that, while InsurTech investment totalled US$1.6bn in
banking and capital markets built up a 2016, with both the volume and value of
considerable weight advantage by starting deals having roughly doubled since 2014.
their FinTech journeys earlier, it is the Q1 2017 was slow by comparison, but then
insurance industry that will ultimately things really picked up again during Q2,
see the greatest benefit – and the with 50 percent more deals than in Q2
highest levels of disruption – from 2016, and a stunning US$853m invested.
this global upsurge of innovation. Furthermore, InsurTech is now a truly
global trend. The US remains the dominant
market, although the UK, Germany, China
and India are now significant markets in
their own right. And many other countries
are following suit.
4
ACCENTURE
13
2014
11
21
2015
ANALYTICS / 26
BIG DATA
28
2016
37
2017 15
5
2014
FIGURE 3
5
THE NUMBER OF INSURTECHS
FOCUSING ON ARTIFICIAL
INTELLIGENCE CONTINUED ARTIFICIAL 2015
5
TO SOAR DURING THE FIRST
HALF OF 2017 INTELLIGENCE 15
Number of InsurTech deals involving / INTELLIGENT
each selected type of technology
AUTOMATION 15
2016
16
2017 23
2014 6
3
INTERNET 2015
OF THINGS / 8
CONNECTED
INSURANCE 14
2016
13 1ST HALF
2017 8 2ND HALF
What is driving this growth? The answer But this number did represent a significant role in funding future technologies than
lies partly in the emergence of a cohort increase over the preceding two years – up the InsurTech numbers alone imply.
of startups whose products leverage from 3 percent in 2014 and 12 percent in Furthermore, as InsurTech becomes ever
technologies such as analytics, artificial 2015. This positive shift shows that insurers more established, a greater number of
intelligence (AI) and the Internet of are willing to wager an increasingly large insurers will likely channel more of their
Things (IoT). These are three elements stake in the future of their own industry. funding activities there, and drive further
the insurance industry views as critical growth in the InsurTech space.
in delivering increased levels of Insurers’ investments might represent
personalisation and better real-world just a small proportion of total InsurTech
outcomes for customers. Accenture’s funding, but these companies are actually
analysis of more than 550 InsurTech investing significantly larger amounts in
deals shows how the number of deals other types of startup. Accenture’s global
relating to each of these technologies analysis of investments made in 2016 by
roughly tripled between 2014 and 2016, 75 leading insurers revealed that only
and that the number of deals related to 17 percent of deals related to InsurTech
AI continued to grow strongly during companies; the other 83% related to
the first half of 2017 (see Figure 3). startups from outside the InsurTech space,
but often with a focus on technologies that
What is notable about this funding is hold potential for the insurance industry
that it is mainly coming from outside the in the future. Insurers have routinely
traditional insurance and reinsurance funded startups dealing with payments,
space. Just 14 percent of the InsurTech analytics, data protection, and healthcare,
deals taking place during 2016 featured an for example. As such, insurers have for
insurer or its strategic venture arm. some time been playing a more significant
5
3
how to integrate versus 300 days’ culture conundrum is On a more practical level, InsurTechs
themselves into
a big sticking point. InsurTech involves should bear in mind that their technologies
agile business approaches, coupled with are inherently cutting-edge, whereas
an industry that a spirit of ‘try and see’ rather than ‘learn many insurers’ legacy platforms – which
know how. Get sheer size of insurance organisations governance structures can be difficult
indeed the This will require patience from InsurTechs. cognizant of the importance of platforms
customer
They must understand the realities of and ecosystems. Accenture’s Technology
the market they are entering, which Vision for Insurance 2017 found that
ACCENTURE
and motivations of working in the
insurance space? Customer-centricity
and the need for mutual understanding
are high on the wish-list. Two founding
CEOs share their thoughts.
Why did you I felt that the insurance industry was The founder of Wired magazine once
choose to target the very traditional and suffering from a quipped that all successful startups in
insurance space? communication issue with its customers, the past 10 years have done only one
especially the digital customers. I’d thing: they have taken what was done
experienced this problem myself when offline and moved it online. Uber, Airbnb
buying and claiming – and I wasn’t and the whole Fintech phenomenon are
alone. For me, it was clear that insurance examples of this. Insurance is the last
products should start from the customer remaining frontier in this megatrend, with
rather than from pre-existing processes. just one in ten policies (globally) being
sold online today. So we decided to move
into insurance to help insurers make the
transition.
What are the biggest To understand the industry deeply. As with any regulated industry, it takes a
challenges facing Startups with little or no prior knowledge long time to get your initial proposition off
startups entering of the insurance industry struggle the ground. But once that does happen,
or already operating to quickly demonstrate their value growth can follow very quickly. This means
in this area? proposition and make tangible impacts. that startups are often simultaneously
Another significant challenge is recruiting having to deal with very slow decision-
people who have that ‘startup agile’ spirit making and very fast execution, which for
but who can also cope with the often slow some teams can feel unbalanced.
pace of the insurance industry.
How easy is it to partner Our approach to new partnerships is I’ve been very impressed by insurers’
or collaborate with simple: we open the discussion by sharing willingness to learn, and the involvement
traditional insurers, and why SPIXII exists, and ask in return why of the broader ecosystem (analytics firms,
what could be done to the insurer exists. SPIXII exists to make consultancies, conferences and the media)
improve these working insurance simple, accessible and personal has also helped bridge the gap between
relationships? for everyone. If the ‘why’ of the insurer InsurTechs and traditional insurers. That
resonates with ours, then the basis of being said, we can always do more. Often
understanding is set – the rest is just about it comes down to personal relations
figuring how we can work together and between young companies and the
what it will look like! incumbents in the area, and finding
win-win propositions that ultimately
benefit the customer.
7
InsurTechs are primarily targeting
ACCENTURE
FIGURE 4
Which segments of the insurance But InsurTechs should not feel THE MAJORITY OF
industry are being targeted by startups? discouraged from targeting life insurance INSURTECHS ARE FOCUSING
ON THE NON-LIFE SECTOR
Accenture’s analysis of more than 550 and commercial lines. Indeed, the size Total number of InsurTech deals,
InsurTech deals that took place between of the financial prizes on offer might segmented by type of insurance business
2014 and the first half of 2017 shows ultimately prove larger than those in the
26% 35% 25% 25% 34% 27% 25%
that deals relating specifically to non-life personal non-life space. Furthermore,
insurance still account for the majority traditional providers in these areas have
of InsurTech activity (see Figure 4). often not invested strongly in customer
Deals relating specifically to life insurance engagement, and startups that are truly 4% 5% 7%
11%
accounted for just 11 percent of the passionate about improving customer 8%
2% 6%
total during H1 2017, although happily this journeys could deliver significant
figure now appears to be rising steadily. transformation.
8 COMMERCIAL LINES
PERSONAL LINES
INSURERS ARE WAKING
ACCENTURE
UP TO INSURTECH,
BUT LAG BEHIND RETAIL
BANKS WHEN IT COMES
TO ENGAGING WITH
STARTUPS.
When it comes to digital and Insurers should draw inspiration from
technological collaboration with startups, the enthusiastic example set by retail
insurers are significantly less developed banks. They can also learn from the
than their retail banking counterparts. different models employed by banks when
Accenture’s proprietary analysis – using engaging with the FinTech scene. Some
publicly available information – of the choose to invest in startups or acquire
activities of more than 200 insurers them outright, for example, whereas
and 80 retail banks worldwide found others seek a more informal, collaborative
that only 26 percent of insurers were approach. And some banks simply take
providing monetary or non-monetary inspiration from startups and then build
support to digital startups (see Figure 6). their own solutions in-house. Each of these
Furthermore, just 17 percent of insurers four approaches has its pros and cons,
had an in-house venture capital fund (or which must be carefully considered in line
equivalent investment vehicle) targeting with an insurer’s objectives.
the digital or technology space. The
proportion of retail banks engaged in these
and similar activities was approximately
double the figure for insurers.
FIGURE 6
RETAIL BANKS ARE FAR MORE
ACTIVE THAN INSURERS
WHEN IT COMES TO DEALING
WITH STARTUPS
% of retail banks and insurers
engaging in each activity, 2016
10
ACCENTURE
KEY
TAKE
AWAYS
FOR FOR
INSUR INSUR
TECHS… ERS…
• Understand the market and the • Develop your overall innovation
challenge you are solving for. agenda – and then determine
where InsurTech sits within it.
• Ensure that your proposition
is clear, concise and related to • Embrace innovation as part of
that specific challenge or your everyday business, across
business problem. your whole organisation.
11
CONTACT ROY JUBRAJ
THE
Digital & Innovation Lead,
UK & Ireland Financial Services
AUTHORS
kadesh.r.jubraj@accenture.com
STEVEN WATSON
InsurTech Lead, UK Insurance
steven.watson@accenture.com
SIMON TOTTMAN
Insurance Research Lead, UK & Ireland
s.tottman@accenture.com
ABOUT ACCENTURE
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