InsurTech needs to learn from Altfi and FinTech
- 18 Apr
The winds of technology-induced change have been ripping through the financial service industries for quite a while now – banking and fund management being prime examples – but up until now the one corner of the market that has remained relatively undisturbed has been insurance where there has been some noise but little real action. But could it be that even this last corner of the financial services market will eventually crumble under the onslaught of technologists?
Certainly that is the view winging its way from Silicon Valley and the other side of the Atlantic where technology rules and traditions are not cherished, but challenged. The pattern is familiar: clever people with no prior knowledge of a sector, and with no legacy luggage to hold them back, are able to devise systems that can speed processes, such as data collation and management, and reduce costs to both providers and buyers. It is proving to be a potent combination and the level of investment in InsurTech has risen dramatically both from outside investors and also from some very established players who have set up their own in-house VCTs.
Furthermore, it is fast-becoming a global trend, involving the UK, the rest of Europe and Asia. To put this into some perspective, the last report from Accenture stated that the level of investment rose from €800m in 2014 to €2.68bn in 2015. In the meantime, there is also clear potential for partnerships to be established, which could marry InsurTech knowledge with existing market presence.
At The Marketing Eye, we have been both witness, and party to, the changes that have come about in the lending market through Alternative Finance – the term really meaning Alternative to the products and services offered by the banks. Initially, it took the form of a trade war, with the banks – under siege from the regulators, their customers and the media following the 2008 crisis – glowering balefully at these new upstarts threatening to eat their lunch. The hostile period has now passed and given way to a new phase where there is much more of a mood to engage and to share each other’s strengths. The banks have the capital and the customer base; the Altfi providers, such as peer-to-peer business lenders, have the nimble, fast response, low cost systems.
And even the Government has weighed in with its Bank Referral Scheme where SMEs turned down for finance by a bank must now be given the option, by law, to be referred to an alternative source of finance. Could a parallel scheme be created in the insurance market?
If the technologists have their way, the insurance market will come under the same sort of pressures as borrowing and investing has. Die-hard traditionalists will doubtless resist the pressure, but, if it is inevitable, would it not be better to embrace the change rather than fight what might be a losing battle? That means managing the change and forging strategic partnerships as part of the process, which is the option the banks finally had to accept.