Insurance technology is surging, but the insurance industry needs an adjustment
- Insurtech is on the rise globally, but Europe is now growing faster than North America
- London is the European Insurtech capital, despite Brexit
- Marketing and distribution attracts the most investment
The so-called Insurtech industry (insurance technology) surged in 2017, with Europe emerging as the global hub, finds Accenture. But it claims that consumers are unlikely to experience any benefits until insurers rethink their innovation strategy. According to the report the number of insurtech deals increased by over a third (39 per cent globally) in 2017 with deal value also up by about a third at US$2.3 billion.
Good news for Europe in this age of technology competition. While North America still leads in terms of both the total value and the number of deals, which accounted for US$1.24 billion, or 46 per cent of deals last year – the number of deals there grew by only 6 per cent in 2017, while in Europe the deals total increased 118 per cent, while the total value of deals in Europe “jumped an astounding 385 per cent, to US$679 million” says Accenture. Asia-Pacific saw a significant increase in funding, with a 169 per cent rise in deal values, to US$358 million, with the number of deals rising 27 percent. (see illo above: Number of insurtech deals by region)
More good news for the UK too. Despite the uncertainty around Brexit, it continues its emergence as Europe’s insurtech capital, with 41 deals in 2017, representing total growth of 117 per cent over the last two years. Deal values vastly increased in 2017, with US$364 million invested in UK-based insurtechs, up from US$19 million the year before.
The report argues that insurtech SHOULD serve as a catalyst for innovation across the insurance industry, but, says Accenture, the usual T&Cs apply: traditional insurers must recognise that collaborating with insurtech startups is just one part of this process - innovation must be engrained throughout their organizations as well .
From a value chain perspective, it claims, marketing and distribution investment accounted for more than half (53 per cent) of deals globally. It says this is proven by the number of startups pitching slick, app-based sales and distribution experiences, as well as those improving the customer claims journey through mobile photo-evidencing or chatbot First Notification of Loss.
The report reveals that traditional insurers are quickly getting behind emerging technology companies, as the percentage of traditional insurers’ participating in venture capital investments is up 63 per cent over the last five years. The most common areas for these investments were health and digital health (14 per cent of such investments), the internet of things (13 per cent), and big data and analytics (9 per cent).
“Insurtech is no longer just a target for private equity and venture capital — it’s a global phenomenon,” said Michael Costonis, who leads Accenture’s Insurance practice globally. “Insurers are playing a big role in helping reshape the technology landscape across the industry, making investments beyond wearables and telematics to seize the opportunity that exists within distribution to strengthen the customer experience. The next step for insurers is to use insurtech as a springboard to innovate across their entire organization. After all, $2.3 billion is a small slice of the pie when you consider that insurance is a $4.2 trillion industry.”