The COVID-19 pandemic is likely to hasten co-operation between carriers and insurtechs. And the cloud will provide the technology platforms and tools for this co-operation to thrive.
Insurers that have moved much of their IT workloads into the cloud and are able to collaborate with cloud-based start-ups will benefit substantially. They can work with insurtechs to spot promising opportunities, develop innovative products, and reach plenty of new customers.
Already, many insurers are using cloud services to collaborate with insurtechs. Our in-house researchers have identified about 80 cloud-based innovations announced by insurers in the past five years. Well over half of these innovations are the fruits of partnerships with insurtechs. And I’m sure there are plenty more cloud collaborations that haven’t been publicized.
More carriers will announce ties with insurtechs in the next few months.
Notable insurtech collaborations include the Zurich Insurance partnerships with CoverWallet and Snapsheet, as well as the recent alliance between Zurich Connect in Italy and home services start-up Yolo. AXA XL announced a partnership in September with US start-up Neptune Flood Insurance to provide cover to homeowners in flood zones. Earlier, AXA revealed plans to team up with Democrance, a start-up based in the United Arab Emirates, to provide financial services tailored to meet the needs of consumers in developing countries. Another carrier committed to working with insurtechs, Munich Re is collaborating with well-known start-ups Trōv, Spruce, and Next Insurance.
Expect more carriers to announce ties with insurtechs in the next few months.
The signs pointing to greater co-operation are clear. In the wake of the COVID-19 pandemic, most large traditional insurers realize they need to foster closer relations with their customers. They have to deliver more personalized services and experiences. And they need to move fast. Many new competitors are eying their customers. Big digital service providers are especially keen to extend their presence into the insurance sector. As researcher CB Insights recently noted, Apple, Google, Amazon, and Facebook are all edging into the insurance business.
Carriers can bolster their defenses by building strong ties with innovative insurtechs. These start-ups have built their businesses on cloud services. They’re inventive, agile and responsive to shifts in customer needs. They can help insurers delight their customers. What’s more, they can support insurers as they expand into new growth sectors such as healthcare, wellness, and connected homes.
Technology develop burns cash.
Insurtechs can also help carriers plug another gap in their armory. Our research shows that the lack of skills is one of the biggest barriers to successful cloud implementations. Insurtechs often have access to digital technology skills that are the envy of traditional insurers. Specialist cloud skills are especially scarce. Co-operation with start-ups gives insurers access to skills they would often struggle to attract and retain.
The courting between carriers and start-ups won’t be one-sided. Most insurtechs will be eager to cement closer ties with carriers. There’s no doubt that many of these young companies have built impressive business models and developed innovative technology. But few of these companies have had the opportunity to build strong balance sheets. Technology development burns cash. The economic uncertainty triggered by the COVID-19 pandemic will prompt many insurtechs to seek the security of partnerships with large well-funded insurance providers.
The opportunity for insurers to profit from alliances with insurtechs has rarely been better. Those carriers that move swiftly will be able to line up the best partners.