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While insurtech is one of the fastest-growing and most-discussed areas of fintech, most innovation has taken place on the consumer-facing and distribution side.
Now, however, back offices are beginning to benefit, according to a study from Startupbootcamp InsurTech and PwC to be published today.
Here are some of the study’s main findings:
Insurtechs are tackling ever-harder problems. Only 33% of insurtechs launched between 2013 and 2015 focused on mid- and back-office processes. That percentage has risen to over half — 61% — for fintechs launched in 2016. Additionally, the fastest-growing insurtech focus area among applicants this year is underwriting risk and loss prediction.This suggests that even the newest entrants have realized that the biggest opportunity for adding value lies in optimizing legacy insurers’ most fundamental, and therefore complex, operations, rather than in making largely cosmetic fixes.
Insurtechs are leveraging AI to help solve these challenges. Companies in Startupbootcamp InsurTech’s 2017 cohort are increasingly turning to artificial intelligence (AI) to drive their products, according to the study. Given that major insurers are also heavily focused on how AI can be used to optimize tasks including claims processing and underwriting, this suggests that insurtechs are aligning their efforts with the broader industry’s needs.
Insurtechs’ pivot to back-office issues may be a strategic move to boost their appeal to potential partners. Incumbent insurers now see partnership as the best way to derive value from insurtech, both in terms of boosting revenue and streamlining costs, according to the study. 45% of legacy players are now collaborating with insurtechs, while in 2016 only 28% said they were exploring such partnerships. Insurtechs may be turning their attention to incumbents’ biggest pain points to take advantage of their growing openness towards collaboration, seizing the opportunity to scale.
However, a big barrier still stands in the way of insurtechs realizing their full potential. Insurtechs are now turning their attention to the insurance industry’s most fundamental challenges and attracting more incumbent partners. But Startupbootcamp and PwC’s study found that only 17% of incumbents think they’re good at collaborating with insurtechs, and that many startups find such partnerships “frustrating” and slow. This indicates that insurers are running up against the same problem other financial services incumbents are: Figuring out how to overcome obstacles like differences in corporate culture to work effectively together. Until this obstacle is overcome, insurtechs might struggle to become indispensable partners for legacy players, regardless of the complexity of the problems they decide to tackle.
Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on insurtechs that:
Explains the structure and current state of the insurance market.
Highlights areas where insurtechs can help legacy players modernize.
Describes where insurtechs are competing with incumbents and how their models compare.
Provides case studies of insurtechs.
Outlines the legacy response.
And much more.
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