Carriers are looking for opportunities to invest in or partner with Insurtechs. Not only to advance their own systems and solutions but also to enhance the carrier experience across the board. And the appetite for new tech designed to empower incumbents and increase distribution is growing across the industry.
There are a lot of Insurtech companies to choose from, across a range of solutions. The biggest fear and, until recently, the biggest risk InsurTechs posed to the insurance industry was replacement. No longer do incumbents need to compete head-to-head with InsurTech companies. Instead, many new solutions are designed to support the existing ecosystem while providing a much-needed improvement to internal operations, customer experience, and how they sell and service policies.
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Insurance agents can benefit in many ways from carrier investments in InsurTech. For those who work exclusively for one carrier, InsurTech investments can make their jobs easier, such as by providing them with new tech tools to reach customers. And for independent insurance agents who work with multiple carriers, these InsurTech investments could help streamline these relationships by making it much easier for agents to provide policy comparisons.
#1: Buying InsurTech Businesses
One way insurance companies are investing in InsurTech businesses is by purchasing a stake in these companies or by buying startups outright. In doing so, they earn a financial return from the success of these businesses and/or incorporate some of their technology into their own offerings.
Acquiring InsurTech businesses can help carriers quickly gain new capabilities. Rather than building solutions from scratch, which could take significant time and money, buying an InsurTech business can allow carriers to integrate their technology right away.
“Target companies help insurers’ capture cost synergy, increase competitive advantage, and transform their products and services to appeal to today’s customers,” says KPMG.
Buying an InsurTech company outright is one strategy that can make financial sense. But some carriers investing in insurtech choose to make smaller financial investments in these businesses by purchasing a percentage of these companies. While this may give them limited control (which can vary depending on the size of their stake), they still gain financial benefits as these companies grow.
“Investment in InsurTech continues to climb, but unlike what we have seen in several other FinTech verticals, investment is increasingly driven by incumbents and not solely from the venture capital space,” notes the Milken Institute.
#2: Partnering With InsurTech Solutions
Another way carries invest in InsurTech solutions, without acquiring an equity stake in companies, is by partnering with them in mutually beneficial ways.
“Despite early fears about disruption, most InsurTechs are more interested in partnering than they are in unseating incumbent players,”KPMG.
In our own case, Talage partners with a number of top-rated insurance carriers (such as AmTrust, CNA, and Travelers – 15 to date) to expand their reach through our InsurTech solution, Wheelhouse. As a result, independent agents using Wheelhouse benefit from these partnerships. Agents and Brokers are able to provide online, bindable commercial insurance quotes for their clients through the agent portal. Or, their customers and prospects can instantly compare multiple policy quotes through our white-label solution, rather than being limited to a quote from just one company or having to wait days for quotes from multiple carriers.
In addition to independent agents benefiting from these partnerships, some carriers are providing this solution for their agents to help them grow and manage their business better. In addition, we work with MGA’s to help further their capabilities and distribution as well.
Other types of partnerships between insurance carriers and InsurTech solutions can include:
- Joint Marketing Efforts: A partnership could be as simple as, say, an insurance carrier working with an InsurTech firm to produce a webinar, with the goal being that both parties provide educational value and potentially expand their reach by getting in front of new audiences.
- Sharing Expertise: An InsurTech firm might have special knowledge of a certain type of technology like online sales, whereas an insurance carrier might have expertise in an internal area, like scaling a workforce. So, the two companies could collaborate to help one another learn how to improve in these respective areas.
- Creating White-labeled Solutions: If an insurance carrier wants to gain some functionality that an InsurTech company provides, such as a smooth mobile app experience, they might partner with that business to create a white-labeled solution. In other words, the insurance carrier could improve their own mobile offerings by having the InsurTech firm create a solution that’s branded on the carrier’s behalf. That way, the carrier can better serve their customers while the InsurTech firm gains some business and perhaps a proof-of-concept.
While these partnerships may not be as direct of a way for insurance carriers to advance digitally compared with making InsurTech acquisitions, insurance agents benefit when carriers evolve their technology or increase their distribution through these partnerships.
Partnerships can also help strengthen InsurTechs, giving some of these startups a chance to build up their own businesses and reach a wider audience. Insurance agents may not currently have access to a lot of InsurTech tools, but over time, as the ecosystem grows stronger, they will be able to more easily add them.
As Accenture notes, traditional insurers are often “unsure how to harness new technology” and InsurTech startups are often “unsure how to unlock the insurance market.” So in many respects, the two sides need each other.
#3: Investing in the Use of InsurTech
In addition to financially investing in InsurTech companies by buying equity in them, insurance carriers can also simply invest in InsurTech in terms of purchasing the solutions or services they offer. As a result, insurance agents can gain access to new tools.
For example, an insurer might purchase a subscription to an InsurTech software-as-a-service provider that enables the carrier to improve in areas like being able to:
- Analyze customer behavior to improve sales and marketing efforts
- Make underwriting decisions with the help of artificial intelligence
- Automate straightforward customer queries so that agents have more time to handle complex issues
As these examples show, there are so many ways that insurance carriers can invest in the success of InsurTech businesses. The two sides do not have to be in conflict with one another, but rather InsurTech solutions can help insurance carriers evolve.
Increasingly, customers want to be able to buy insurance online, file claims digitally, and get the information they need from their insurers quickly. And as insurance carriers increasingly make these different forms of investments in InsurTech businesses, agents can more often improve how they serve customers.