Collaboration Over Competition: The New Engine of Insurance Innovation

There has been a lot of concern over technology adoption among insurance companies. Thin margins, legacy IT systems, complex product structures, regulatory barriers, and much more, all of these factors sum up and explain why the insurance industry is not at par with banking and other sectors when it comes to technology. It is not fair to call this “cultural resistance,” but it is important to choose a path that will eventually help us find an answer.

Collaboration Will Navigate Complexity and Drive Innovation in Insurance

Revenues and margins are probably the most quintessential business terms that dictate management performance. To achieve those numbers, companies don’t just try to outpunch their competitors but also try to eliminate a few. However, the insurance industry has shown some surprising trends lately. Insurers have started betting on insurtechs, which only 10 years ago were considered a major competition. In 2024 alone, insurers who invest in startups have deployed 50% of their investing capital towards Insurtechs. This is not just collaboration; this is trust. We have witnessed some notable multi-billion dollar acquisition deals as well, like Munich Re acquiring Next Insurance. This is not just collaboration; this is a testament to results. Through this blog post, we would like to put forward a few perspectives that can engross you into this idea of collaboration over competition, which is, in fact, one of the emerging trends in insurance.

With increasing digital expectations, customers now want more personalized products and services with minimal effort and maximum benefits. Progressive has been successful in providing this to their customers. They have been able to offer more accurate pricing to their auto insurance customers based on their driving behavior by leveraging data-driven pricing techniques. Unlike traditional factors, Progressive used various driving parameters to personalize premiums based on each driver, giving rise to the Usage-Based Insurance (UBI) model. This reliance on data has also increased their velocity of claims management, thereby leading to increased customer retention. They were able to integrate this data-driven personalization through their crucial collaboration with Cambridge Mobile Telematics, which seamlessly integrated its processes into Progressive’s offerings.

Another collaboration worth highlighting is the acquisition of Singlife by Sumitomo Life, another multi-billion dollar corporate action. By acquiring Singlife, Sumitomo gains direct access to the Singapore insurance market, which is one of the fastest-growing in the APAC region. Sumitomo Life is now able to sell various insurance products in digital-first form, which it previously could not. Another product of collaboration.

There are plenty of such examples of collaborations in recent times that have kept the flame burning amidst extreme noise regarding technology. This does not mean that the buck stops here. In an attempt to become a forward-looking industry, it is always important to reinvent the wheel. Today, the noise and discussions are about generative and agentic AI; tomorrow, this will be about satellite data, digital twins, and quantum computing. Each technology comes with a challenge, it is complex but also has the potential to deliver unprecedented results. This is exactly where collaborations can take a step forward and help insurance companies navigate through the complexities and uncertainties of growing and emerging technologies, as well as reap the benefits they bring.

These collaborations can be in various capacities, from building prototypes and co-developing technology solutions with technology service providers and insurtechs, to entering joint ventures or acquisitions with insurtechs. In a recent survey conducted by NTT DATA, it was observed that there has been diversification among insurance companies in their primary approach to innovation. From almost 90% of insurance companies believing in developing in-house technology capabilities in 2020, now only 38% try to do it by themselves. The rest have started relying on partnerships with either tech giants, Insurtechs, or open innovation through ecosystems. So while many have started integrating technology in their business, it is imperative that the rest catch up too.

With increasing digitalization, and every passing generation getting more and more hooked to it, the augmentation of digital-first solutions and expectations is only going to increase. This is not a big technology challenge; it is a massive business opportunity with umpteen possibilities. All that is needed, is the right strategy.