Insurtech Journey: Perspective of Ecosystem Players

The session was characterized by a great atmosphere of consensus and, above all, by a feeling of optimism on the part of the speakers regarding the possibilities offered by Insurtechs. The event revolved around the idea of insurance ecosystems, where all the players must collaborate to create the insurance of the future, a space where there will no longer be such thing as specific policies or lines of business, rather services aimed at covering people's needs.

Oscar Paz, CEO of Insurtech Community Hub, opened the event with an introduction before giving the floor to Richard Calvo, Head of Insurtech at NTT DATA EMEAL, who presented the sixth edition of the Insurtech Global Outlook Report: The Four Forces of Acceleration.

The round table included Juan Cumbrado, Innovation Director at MAPFRE; Miguel Cruz, Chief Digital Business Officer at Reale Group; Ana Zamora, CEO and Co-Founder of Vitaance; and David Gómez, Managing Partner of Asebrok. The debate was moderated by Lluís Viñas, Investment Director at Alma Mundi Ventures.

The conversation focused on the following 3 topics

·         Consolidation or hype in Insurtech investments.

·         The role of Insurtechs in distribution.

·         The Technological Giants and their role in the disruption of the insurance sector.

Consolidation or Hype

The event was structured in two blocks driven towards the increase in investments and the opinion of the participants on whether this ecosystem is exploding or whether a hype effect is already beginning to take place.

For example, it was highlighted that in 2021 a herd effect in Insurtech investments was already beginning to be observed: investors started to suffer from what is known as FOMO (Fear of Missing Out). Thus, many of them only made this type of investment in order to not be left behind, to follow a trend, and not so much because they trusted the model behind the startup with a strategic sense.

In recent years, many generalist Insurtechs have started to emerge, so it is likely that, in more traditional markets such as Insurance, they will have problems surviving, given their lack of specialization or their troublesome ability to integrate themselves into the insurance value chain and the insurers’ operations.

In parallel, the question of what insurers do once they have "incorporated" Insurtechs into their organizations was also discussed. The challenge is, beyond using the necessary capabilities of the startup, not to kill the Insurtech, and to be able to continue to leverage its innovative capacity.

The participants also reached the consensus that perhaps a first wave of innovation has already gone by and that we are now in a consolidation stage, in which investment models will move towards more specialized and somehow solid models.

Regarding the current moment, some of the speakers consider that, as has happened in other sectors, the growth curve will moderate and continue to grow. For instance as it happened in the banking industry, as banks did not disappear with neobanks, neither will insurers with Insurtechs. There will be corrections for macroeconomic reasons, but not endemic to the sector, so it will continue to grow under the prism of ecosystems and open innovation.

Other speakers also pointed out that the number of Insurtechs may stop growing so fast because insurers have realized that they can create insurtechs within their organizations. They will start to create new business models within their internal innovation initiatives, moving from strategy to technology and business areas. In this context, insurers have also started to naturally incorporate new ways of working and have started to perceive similar results to those they would obtain if they collaborated with or bought an Insurtech.

Insurtechs, Emerging in the Context of New Distribution

Another topic focused more specifically on the challenge of distribution. The participants in the debate analyzed the impact of Insurtechs in the world of distribution, reaching the conclusion that there is room for Insurtechs, but where traditional distribution also contributes fundamentally to the generation of value, especially that directly delivered to customers. In fact, the speakers explained that the message that Insurtechs are going to end up disintermediating the sector only reflects a profound lack of knowledge of this industry, and claim that the mediation market is a tremendously resilient, adaptable and flexible business.

It was argued that Insurtechs are going through a maturation cycle and that we will start to see hybrid models with mediation and reinsurance towards a much more sustainable and well-founded model.

One of the points of greatest consent was the difference in distribution when discussing of value. Offering value to the customer is not the same as offering lower prices alone. While the former model is more consistent and is based on parameters such as reliability, agility or quality of service, the latter only depends on the price factor, and cheaper models will always emerge.

The event emphasized the idea that entrepreneurship arose in insurance on the distribution side at a time when the industry was not characterized by digitization. That stage is now behind us and many more Insurtechs have emerged that are involved in complex processes in other areas of the insurance value chain.

So much so that the speakers were quick to point out that Insurtechs are doing spectacular things. A revolution is taking place in the insurance world and Insurtechs are part of it. 

The role of MGAs was also addressed and a distinction was made between those that only distribute and those other distribution agencies that go further and provide added value thanks to the use of smart technologies. They noted some examples on the application of Artificial Intelligence and Machine Learning to the actuarial model of a risk management company; or of IoT to the underwriting of life, social welfare or risks related to people. Or to other processes related to areas as diverse as claims management or improving customer experience.

Entry of Tech Giants

Another of the topics discussed focused on the entry of the Big Techs or Tech Giants. The speakers highlighted the fact that these players represent an enormous opportunity for the sector, as they could consolidate themselves as a new distribution channel in which insurers can embed their policies.

According to the participants, if they were to go into distribution, these giants would have a good starting position, as they will know how to underwrite a policy with the least amount of data. They can test, experiment and improve processes through intensive use of technology. They also agreed that, at present, it is very unlikely that a technology giant would want to become an insurer and take on the risk of this business, although if they were to enter this part of the value chain, both insurers and distributors would find it more difficult to maintain their relationship with the customer, because these players handle technology and data very well, integrate very easily with third-party systems and also offer a first-class customer experience. 

But this "threat" is also an opportunity of itself, as the industry will transform much faster when non-insurance players enter and start to change the rules of the game. Whenever new business models or new technological capabilities are introduced, business arises for the different players, who must adapt their mindset and become more and more flexible.

You can watch the full event here: