How the global insurance industry embraces the insurtech opportunity

The global insurance industry has moved beyond buzzwords and rhetoric to tangible, practical solutions that overcome very specific friction points for the end client in the insurance value chain.

Simply being aware of change will no longer be enough, as the Australian delegates to this year’s Digital Insurance Agenda (DIA) in Munich realised. Just one year after our inaugural tour to Insurtech Connect in Las Vegas, Macquarie Business Banking, in partnership with Insurtech Australia, led a delegation of 40 people. Brokers, insurers, underwriting agents and insurtech start-ups joined us in London and Munich in October 2018.

In these more mature overseas insurance markets, incumbents clearly see insurtech businesses as collaborative and through the lens of partnerships rather than disruptive threats.

“The insurtech movement is much more about enhancing the distribution of insurance and simplifying the value chain for the client. It’s not focused on disruption,” emphasises Eoghan Trehy, Macquarie Business Banking’s National Head of Insurance.

Insurtech Australia CEO and Co-Founder Simon O’Dell says their research with EY found 65 per cent of insurtechs exist to enable incumbents so they can provide more value. (1) “They’re not seeking to acquire insurance customers as a competitor,” he says. He believes the conversation has moved on in mature markets, and now traditional insurers, re-insurers and brokers are reaping the benefits of their digital transformation strategies through collaborative partnerships with insurtechs.

Solving real issues in the insurance value chain

One example the delegation heard about was the application of blockchain to marine insurance, which Trehy believes “has the potential to be a game changer for the insurance sector.” EY’s Ian Meadows presented this topic to the delegation as part of two informative days in London, before the tour moved on to Munich for DIA.

By storing immutable digital records and exchanging digital assets in real time, blockchain enables smart contracts with a robust audit trail. EY invested in a proof of concept for marine insurance in 2016, and is now extending the functionality to cargo, aviation and other complex insurance areas.

“It’s very exciting to see a tangible product already delivering value in industries as challenging and labour intensive as shipping and marine insurance,” Trehy says.

New models for insurtech investment

The UK’s fintech market was worth 4,500million Euros in 2017 – almost 22 times the size of Australia’s, and more than double the size of Germany’s. (2) “It’s clear that incumbents are investing in the market – all the major players have innovation funds and digital labs,” says Brenton Charnley, Chairman Insurtech Australia. “Robert Lumley of Insurtech Gateway told us ‘all insurtech ideas are either brilliant or bonkers’ – you need to be willing to invest to find out whether it’s a real solution.”

According to Lindsay Nieman of venture capital fund XL Innovate, there are as many as 2,500 insurtechs in the global ecosystem (3) – and reinsurers are actively investing.

“Munich RE is the most active organisation globally for insurtech investment,” notes Trehy. “It was interesting to hear them acknowledge how much friction occurs when you try to innovate inside a ‘business as usual’ structure.” Instead, Munich RE allows a three month timeframe to take a concept to product stage – and a further 33 months to deliver an acceptable ROI.

Allianz shared a different approach to digital investment. The Allianz X team is tasked with ‘accelerating digitisation across relevant ecosystems’ including insurtech, and acts as a bridge between the group’s business lines and investments in mid to late growth stage partners.

Opening up to new global connections

With its motto to ‘be insatiably curious’, DIA invited attendees to open their minds to what is possible, and to new opportunities for partnership. “Insurtech is a global business, and its technology is not limited to country borders,” notes Charnley. “Insurers in Australia use overseas technology and vice versa. Being immersed in this more mature market really shapes a new perspective of its potential.”

“When Australian tech companies solve client problems, they’re a match for anyone on the global stage,” says Trehy, who was proud to see tour delegate Daniel Sandaver’s Codafication take out the ‘Best Strategic Impact’ award in a pitch against 48 other firms at DIA.

During the conference, insurtech pioneers Robin Merttens and Paolo Cuomo reaffirmed the Global Insurtech Alliance – a new initiative co-founded with Insurtech Australia. “Global connectedness is so important for a start-up ecosystem with a small home market like Australia,” explains O’Dell. Australia’s insurtech community is still growing, but the next leap forward will only occur when incumbents start to take meaningful action.

“The opportunity for brokers is here and now,” says Charnley. “It’s more than simply digitising forms – it’s using data the way customers think we use data. It’s putting insurance where the customer is, and using technology to automate advice, rather than depend on human-based processes.”

This doesn’t mean removing people from the entire value chain. Only they can enable the technology, just as technology can now enable the insurance.

“This level of change will take strong leadership. You need to be willing to challenge the status quo constructively, and implement what is possible,” concludes Trehy.

Talk to a specialist

Fill out our form so we can connect you with the right banking specialist.

Business banking

Monday to Friday 8:30am – 6:30pm (Sydney time)

1800 442 370

Vehicle finance

Monday to Friday 9am – 5pm (Sydney time)

1800 620 673

Additional information

Unless stated otherwise, this material has been prepared by Macquarie Bank Limited ABN 46 008 583 542 AFSL & Australian Credit Licence 237502 ("Macquarie") for general discussion purposes only, without taking into account your personal objectives, financial situation or needs. Before acting on this general information, you must consider its appropriateness having regard to your own objectives, financial situation and needs. The information provided is not intended to replace or serve as a substitute for any accounting, tax or other professional advice, consultation or service.