Insurtechs bent on disrupting the insurance industry haven’t succeeded so far, but a future wave of insurtechs might emerge to accomplish a similar goal, carrier executives said recently.
Speaking at the 38th Annual S&P Insurance Conference in June, Jack Roche, president and chief executive officer of The Hanover Insurance Group, said, “I’ve learned to not underestimate smart people that have a real advantage in terms of their knowledge around software and technology, and have keen insights around customer preferences and demands—and how they’re changing.”
“While the first and second round of insurtechs haven’t really achieved what they set out to achieve, I believe they’ve been a major catalyst for all of us to think more about the innovations across the value chain,” he said.
“I’m one that believes that if we don’t make more meaningful progress over the next five years in terms of creating real efficiency and better serving customers with all the tools that are available to us, that some of those [insurtech] folks, or the next round of those folks, will refocus on disruption, likely in the more commoditized areas,” Roche added.
Roche was responding to a question from Brian Suozzo, a director of P/C Insurance for S&P Global Ratings, who asked Roche and two other chief executive officers of property/casualty insurance organizations to share their insights on insurtech innovation. Insurtech “was a buzzword a few years ago, but it’s fizzled somewhat,” Suozzo observed, asking the executives to assess the long-term benefits from technological innovation from various waves of insurtechs—past and future.
Suozzo tossed the questions to Markel Corporation’s Co-CEO Richie Whitt first, and Whitt introduced the idea that partnerships with insurtechs make sense for carriers, even though the insurtech track record in the public markets hasn’t lived up to the buzz that Suozzo described.
“It’s clear probably at this point that a little bit of the luster is off the insurtech market. But that’s not to say the insurtech market hasn’t added [value] to the insurance industry. There’s been a lot of innovation that’s come out of the various insurtechs that have been created. There’s been a lot of investment there, obviously, that has been able to fund some of that innovation. And while, at this point, at least, they haven’t taken over, which might have been the aim initially at least for certain of them, it’s been more of a partnership model,” Whitt said. “That is really the approach we’ve taken. We are working with a number of insurtech partners that we believe have come up with some great innovation, and [we] combine that with our knowledge of product, our knowledge of distribution, just our knowledge of the industry and work together to provide better solutions for customers.”
Concluded Whitt, “While the valuations probably don’t look so great today, I wouldn’t underestimate the impact that insurtechs had and will continue to have for the innovation they’ve brought into our business, the partnering that continues to happen between the old-line insurers and these insurtechs, and just the fact that all of that is leading to—hopefully—better solutions for customers.”
“That’s really how we’ve approached it. We’re looking to partner with people who have great ideas and can create good solutions for our customers.”
Referring to past waves of insurtechs, Roche said, “If they’ve learned one thing [it’s] that underwriting and generating good loss ratios is a little bit more complicated than some thought.”
“But that will change over time as data and technology advance and opportunities to become more efficient and to underwrite in a unique and different way really start to emerge,” he added.
Roche said that The Hanover has dedicated resources, “tethered to the business but not preoccupied with the day-to-day operations of the business,” doing targeted explorations of the InsurTech landscape.
Across the industry, he predicted that partnerships will bear fruit over the next few years. “You’re going see some meaningful advancements by a number of carriers to get at data transfer, better claims propositions, and eventually some movement on the customer acquisition side, although that’s clearly the hardest part.”
Kristof Terryn, CEO of Zurich North America, distinguished between the personal and commercial insurance space when Suozzo asked him to assess insurtech opportunities and threats. “The ability to disrupt on the personal lines side through technology is just a lot bigger,” he said. “Some of these platforms have massive power in the market. And also when consumers move toward, instead of owning a car, to a rideshare, or when insurance becomes embedded in a broader home security offering, it will be harder for us to capture that consumer relationship.”
“So, on the retail side, I think that potential for disruption is much bigger.”
“In the commercial insurance space, it’s just hard to replicate a network of risk engineers—an international network—[and] the whole regulatory complexity that comes with it.” Agreeing with Whitt, Terryn said the impact of insurtech in commercial lines has been much more involved with enabling existing carriers than disruption.
“There, the race will be between existing carriers. Who uses the new technology best in risk selection, in servicing the customer, in driving much more efficiency and in creating new products as well?”
“So, I’m not underestimating the impact of technology. It’s going to be massive, but I do not think that you will see disrupters in the commercial insurance space that will take the end-to-end value chain. I think it’ll be much more who leverages that technology best in certain parts of that value chain,” Terryn said.