Reimagining Insurance: Lessons from the InsurTech Frontier
The insurance industry is at a crossroads, facing unprecedented challenges and opportunities in the digital age. At the Digital Finance World 2019 conference in Frankfurt, a panel of industry leaders explored how InsurTech startups are reshaping the sector with bold ideas and transformative technologies.
Featuring Lukas Naab (MINDS-Medical), Uli Kleber (Accenture), and Karl Heinz Passler (Baloise), and moderated by Matthias Reinwarth (KuppingerCole Analysts), the discussion dove into critical questions about innovation, collaboration, and the future of customer-centric insurance. Set against the backdrop of one of Europe’s premier events for finance innovators, traditional players, blockchain experts, and regulators, the panel offered a glimpse into how insurers can adapt—or risk being left behind.
From fostering partnerships with InsurTech disruptors to overcoming regulatory hurdles, the lessons shared at this session offer a roadmap for reimagining the future of insurance.
1. Innovation in Established Insurers: Progress Amid Challenges
In recent years, established insurers have started to embrace innovation, albeit at varying speeds. Initially, many firms perceived digitization—such as converting paper-based processes to digital formats—as sufficient. However, panelists emphasized that true innovation goes beyond this, requiring a holistic rethinking of customer experience, internal workflows, and product offerings.
While some insurers have made meaningful progress, others still lag behind, often due to deeply ingrained legacy systems and cultures resistant to change. The message is clear: Insurers that fail to innovate risk following the path of companies like Kodak, which were unable to adapt to a rapidly changing environment.
2. Which Business Lines Innovate Faster?
The pace of innovation within insurance depends heavily on the type of business line:
Non-Life Insurance: With fewer regulatory constraints and simpler products, non-life insurers have been quicker to adopt innovations, such as automation in claims processing or fraud detection.
Life Insurance: The life sector has struggled to innovate due to its long-term contract structures and stringent regulatory requirements. This has frustrated many within the industry who see its potential for transformation but are hampered by compliance burdens.
Health Insurance: Positioned between the two, health insurers face unique challenges, such as handling sensitive patient data while adhering to strict privacy laws. Nevertheless, there is significant room for improvement through digitization and AI.
3. The Role of InsurTech Startups
InsurTech startups have become essential drivers of innovation, offering fresh ideas and solutions to long-standing industry challenges. Typical use cases include:
Fraud Detection: Advanced AI systems can analyze patterns in claims to identify potential fraud, delivering immediate cost savings.
Streamlined Customer Verification: Startups are introducing tools for instant ID verification via facial recognition, reducing onboarding times from days to seconds.
On-Demand Insurance Products: Innovative startups have enabled insurers to offer highly flexible policies tailored to customer needs, such as single-event or travel insurance.
Payment Solutions: Plug-and-play APIs developed by startups make it easier to integrate modern payment options, bypassing lengthy internal IT development cycles.
These solutions not only improve operational efficiency but also enhance customer satisfaction, making insurance processes more seamless and user-friendly.
4. How to Minimize Risks in Collaboration
Working with InsurTech startups presents risks for both parties. For insurers, risks include dependence on untested solutions and potential startup failures. Startups, on the other hand, face challenges such as slow decision-making processes within large insurers and unclear objectives. To mitigate these risks, the panel recommended:
Pilot Projects: Starting with proof-of-concept initiatives allows both parties to test compatibility and feasibility without major commitments.
Due Diligence: Thoroughly vetting potential partners ensures alignment in values, goals, and capabilities.
Building Trust: Transparent communication about goals, processes, and data usage is critical for fostering a productive relationship.
5. Building a Culture of Innovation
One of the biggest challenges for established insurers is fostering a culture that supports innovation. This requires dedicated teams with sufficient authority, resources, and budget to experiment and implement new ideas quickly. Insurers must also be willing to adopt a “fail fast” mindset, allowing small-scale failures to inform larger successes. Panelists stressed the importance of breaking down silos within organizations to enable cross-functional collaboration and faster decision-making.
6. Navigating Compliance Challenges
Compliance is a major hurdle in the insurance sector, particularly in regions with stringent data protection laws. Insurers must ensure that innovation initiatives comply with regulations while maintaining customer trust. One approach is to work with startups that offer on-premise solutions, keeping sensitive data within secure environments. Transparency about how data is handled and stored also helps alleviate concerns and fosters confidence in new technologies.
7. How Insurers Perceive Disruptive Startups
The rise of digital brokers and aggregators has created tension between traditional insurers and disruptive startups. On the one hand, these intermediaries provide customers with unparalleled convenience, consolidating policies and making switching providers effortless. On the other hand, they threaten to reduce insurers to invisible product providers, eroding brand loyalty and customer engagement.
Panelists noted that many traditional insurers have been slow to address this challenge. By focusing on improving customer experiences and regaining ownership of customer touchpoints, insurers can better compete in an increasingly digital landscape.
8. Does InsurTech Make Insurers Less Visible?
One of the most pressing concerns is the potential loss of visibility as customers increasingly interact with digital platforms rather than insurers directly. This trend underscores the need for insurers to reclaim their position as customer-facing entities. By developing their own digital ecosystems and offering seamless user experiences, insurers can ensure that they remain relevant and valued by their customers.
9. Recommendations for Insurers and InsurTech Startups
For Insurers:
Clearly define internal needs and innovation priorities.
Empower dedicated innovation teams with the authority and resources to act swiftly.
Collaborate with startups that provide targeted solutions to specific challenges.
For Startups:
Stay laser-focused on delivering value in a specific niche.
Build trust through transparency and a clear understanding of the insurance industry.
Demonstrate tangible results early through proof-of-concept projects.
Conclusion
The collaboration between InsurTech startups and traditional insurers offers immense potential to transform the insurance industry. While challenges remain, the shared commitment to innovation and customer-centricity can drive meaningful change. By embracing collaboration and rethinking their approaches, insurers and startups alike can thrive in this rapidly evolving market.