How can insurtech ramp up your firm’s digital renaissance?

Today, we explore the crucial elements of an effective digital strategy, where partnership can deliver results, the challenges insurers face, and the ways they can overcome them.

Jonathan Koopmans and Paolo Cuomo, Boston Consulting Group (BCG), reveal the key strategies for the digital insurer of today.

Insurtech is rising indeed. Less than three years ago, the term was not widely known. Today, every executive at every carrier knows what it means.

But that doesn’t mean they all know how to engage with insurtech firms.

It’s no exaggeration to say insurers are struggling to make sense of the galaxy of insurtech offerings. Today, there are more than 4,700 insurtechs in fields as varied as machine learning and the internet of things (IoT), backed by almost $50 billion in equity funding, according to our research at BCG. The vast majority provide “enabling” solutions; about 70% of the insurtech funding has gone to firms specialising in data and analytics, data protection, and cloud-based IT platforms.

Impetus for insurtech partnerships

Already, the most innovative carriers are forging insurtech partnerships. The biggest risk for an incumbent carrier is not the next insurtech start-up. It’s the competitor that partners effectively with that start-up, harnessing the young firm’s tools and techniques to augment and accelerate the carrier’s digitalisation initiatives.

It’s hard to see a viable alternative for carriers other than “going digital”; their customers are pushing them in that direction. Consumers are increasingly comfortable with mobile and web-based technology, and as such, they expect more and more digital interactions through many different channels. They are very open to new digital solutions. Such solutions are more likely to come from insurtechs than from carriers’ legacy IT operations.

Challenges of digital transformation

Yet as a rule, insurers have not found it easy to “go digital”. BCG’s research shows half of all digital transformations fail to meet their own deadlines, primarily because of legacy IT constraints and inflexible IT architecture. Failure rates of digital initiatives are further exacerbated because insurers’ investments are not focused on the right technology areas.

This is where the right partnerships with the right insurtechs can make a difference. What’s needed is a systematic approach for carriers to engage – a blueprint for a future-proof digital technology foundation that acknowledges an insurer’s digital challenges as well as its aspirations and initiatives.

Sketching out a digital blueprint

No two carriers will have the same digitalisation challenges or initiatives. The AI tool or the augmented reality (AR) app that promises new value for one may be entirely inappropriate for the business needs of another.

BCG finds a six-part view of a carrier’s IT architecture is a good way to start sorting through the maze of insurtech offerings to gauge what will work best in which areas of the carrier’s operations.

Read the full report here.

At the customer interface, most carriers already have made big strides to deliver rich multi-channel, multi-device digital experiences. But they can rapidly refine and extend those experiences by partnering with IoT insurtechs. At the level of business processes and decision-making, insurtechs specialising in virtual advisor tools or in cognitive computing can help carriers tailor services to individual customers’ needs, increasing the customers’ lifetime value. In core insurance functions, blockchain and digital ledger technology (DLT) promise substantial cost efficiencies for carriers’ CFOs.

Looking at a carrier’s central data layer, insurtechs whose expertise is in big data platforms or real-time analytics can help carriers get closer to a “single source of the truth” for all structured and unstructured data. Moving to the infrastructure layer, specialists in cloud orchestration and community cloud technologies can benefit even the carriers that are successfully leveraging cloud-based infrastructure. Underlying all five of those functions is integration and security, where insurtechs are active in data privacy management and cyberattack prevention.

The topic of successfully engaging with insurtechs was discussed in detail in a lively panel session. Watch the webinar below:

This article was first published on InsurTech Rising 365, FinTech Futures’ sister company