Pairing suits with jeans

Insurers and start-ups are addressing an inherent culture clash and finding ways to work together

By Miranda Maxwell

When Insurance News managing director Andrew Silcox met with expert guests for the INsight podcast at this year’s InsurtechLIVE, the full gamut of the start-up space’s past, present and future was explored.

Topics included challenges securing funding, the problem areas insurtechs are best placed to solve and how collaboration between incumbents and start-ups is proving essential for success.

See more pictures from the the event here, and listen to a special feature podcast on InsurtechLIVE here.

Below are some of the views shared by industry leaders:

EY partner Andy Parton

One of the challenges has been insurers and insurtechs working together. We use an analogy, “suits meets jeans” – you know, quite different cultures and a very different pace of working.

Trying to bring those two together has been problematic in the past. If you’re a small start-up, you can’t spend weeks and months working with an insurer to put contracts in place and long proofs of concept.

They need to quickly get into, ‘Is it going to work or not? I need a contract. I need some revenue through the door and growth.’

Both parties really need to come together to work through how to work together efficiently and effectively.

Insurtech Australia CEO Simone Dossetor

We’re starting to see some traction around investment. Last year was very much around AI, and everyone was looking at proof of concept. That will mature. The nature of the insurance industry – being regulated – means it has to move more slowly for adoption.

So there hasn’t been the hype around crypto and neo-banking and some of those things we saw in fintech, but then we didn’t get the drop-off when suddenly they weren’t sexy again.

Insurtech is in some ways a lot harder because you’re connecting to so many different sectors: the property industry, medicine, health, tech – all these different verticals where it’s not just a financial product but how you’re interfacing with the whole delivery.

We’re definitely seeing a global focus and interest in how to take global solutions into individual markets and recognising there are different regulatory needs and product structures.

Insurers are starting to really look ahead and wanting to make sure they’re not being left behind.

We do sometimes talk to insurers that don’t really have a collaborative mindset, and they tend to just do their own thing. But by far the majority we talk to are looking for ways they can add things together and make a stronger proposition.

FreightInsure CEO Simon Schwarz

Over the years, insurtech has been quite an immature market, both in terms of the number of companies participating but also as a consequence of capital providers into that sector, because it hasn’t been very large.

In the US, there are investment banks and advisory services that focus purely on insurtech. Nothing like that exists in Australia.

If we can highlight the activity that is happening in Australia, the start-up and scale-up part of that market will attract more investors and venture capitalists.

That will in turn attract more companies into the start-up side as well, and you get this two-sided market that then takes off.

Insurtech Australia chair James Orchard

The role of the incumbent in our ecosystems is very important, and probably more important than in other markets.

If we want to keep that community alive and keep the insurtech market moving forward here, we’ve really got to think about how large carriers and the
incumbents contribute and help play in that space and collaborate.

So often the view is that start-ups are going to solve all the problems. But it’s collaboration that’s key. In this market, the bigger players really have to show up.

And I think there are huge opportunities if those working in those companies … make it a lot easier for these start-ups to gain access and learn from us, and for us to learn from them.

You can’t do it all by yourself, you need that support, and it’s become quite clear that those companies that are going to be successful have to have an element of collaboration.

That disintermediation disruption vibe – it became quite clear that a lot of those business models weren’t sustainable and, at some stage, you need the incumbent industry.

AI is certainly the biggest trend that we’re seeing. Everyone’s talking about it – you can’t have a conversation without. The potential for AI in insurance is huge.

It’s not just looking at a discrete part of the value chain, there’s a real opportunity where that technology can improve all aspects of the insurance value chain, across underwriting, across claims, and obviously some of the supporting regulatory elements too.

So rather than have a broad, almost horizontal capability, we’re going to see software built specifically for the insurance industry that could have a really disruptive effect on how we do insurance, and that stretches from not just the direct-to-consumer opportunities, but also to specialty and complex risks as well.

The amount of interest in solving very complex workflow problems … specialty or upper mid-market commercial risks … there hasn’t been too much innovation in that space. A lot of that was dodged because it was too hard.

With the advent of AI and the most recent [tech] developments, we’re starting to now have a look at problems that just weren’t high on the list before … It’s going to keep progressing. We will start to see a lot more happening in the upper end.

Finity head of product management and marketing Marcello Negro

In the past 10 or so years that I’ve been in insurance, there really haven’t been many [businesses] that have moved away from the way insurance products were
designed for the past 70 or 80 years.

We’ve seen a couple of pay-per-kilometre car insurance offerings get to market, a couple of really modular travel insurance offerings, but your offering is still fundamentally the same.

I see an opportunity there because customers are crying out for more tailored product offerings without having to tell their insurer what they want.

Customers nowadays almost expect that their service providers, across any industry, know them better than they know themselves, and should be telling them what they want.

It is a slow-moving industry and there’s a disconnect between our desire to provide more customised products and also our tendency to be relatively risk-averse.

Yet the core of insurance is about allowing industries or people to do new and riskier things.

Investors ‘need to shop local’

A report commissioned by Insurtech Australia outlines a vibrant and maturing start-up sector that is reshaping the nation’s insurance industry and holding its own globally.

Insurtech Down Under: Trends, Tech and Triumphs examines emerging solutions, success stories and the difficulties entrepreneurs face raising capital and finding early adopters in the Australian insurance industry.

It says greater support from insurance and private sector investors could accelerate the adoption of risk mitigation and cost-reduction measures while better meeting growing consumer expectations.

Insurtech Australia chief executive Simone Dossetor says there is potential to accelerate change in the local industry through greater collaboration, but “Australia’s private sector and insurance industry isn’t investing where it needs to”. Large insurers and private investors are prioritising offshore tech over Australian innovation and “missing a real opportunity to strengthen the local insurtech sector”.

The nation’s start-up ecosystem has matured, according to the report, with a growing emphasis on capital efficiency and sustainable business models, and funding focused on structured deals over speculative growth.

There are 293 insurtechs headquartered in Australia and New Zealand, with total funding of $US1.6 billion across 100 funding rounds over the past 12 years.

Challenges remain securing early-stage funding, accessing talent and navigating evolving regulatory landscapes, with venture capital “more selective [and] investors prioritising financial discipline and long-term profitability over rapid expansion”.