5 Recommendations for Successful Insurtech Partnershipsby Fintechnews Switzerland October 7, 2021
Incumbent insurers and non-insurance companies are increasingly teaming up with insurtech companies, as they search for novel ways to solve business challenges, inspire innovation and create new business opportunities.
Throughout the years, business relationships involving insurtech companies have consistently increased, reaching a new high of 665 disclosed partnerships in 2020, up from 599 in 2019, according to CB Insights data.
At the same time, funding to insurtech companies hit a yearly high of US$7.1 billion in 2020 and a quarterly high of US$2.5 billion in Q1 2021, showcasing the confidence investors have in the future of the insurtech industry.
For incumbent insurers, insurtech startups are perceived as key enablers in helping them improve their underwriting, claims, distribution, and product development efforts. For non-insurance companies like digital bank Revolut, gig economy platform Uber, and auto manufacturer Ford, partnering with insurtechs means adding insurance-related services and improving their core offerings.
As partnerships between incumbent insurers and insurtechs become increasingly common, Insurtech Insights, an insurtech community, and EPAM, an enterprise software development, design and consulting firm, have produced a new paper on insurer/insurtech partnerships, highlighting five key recommendations for a successful collaboration.
Be clear about the problem that needs to be solved
Incumbent insurers can choose to partner with insurtechs for many reasons, whether that’s to leverage technology to enhance operational efficiency or customer experience, go to market with a new product, target a new customer segment, or expand into new regions.
When deciding to partner with an insurtech, it is critical that, at the outset of the project, incumbents clearly define the problem they want to solve, and identify the capabilities, both internally and from the partner, required to deliver. Diligence at this stage is key to prevent unexpected surprises later on, the paper says.
Get the right people involved early on
Next, incumbents must bring the key decision-makers to the table and get the right people involved in the project as early as possible.
They typically include the business owners, subject-matter experts, information and data-security specialists and procurement teams, but three additional stakeholder groups should also be brought to the table: the enterprise architects, the strategists, and the end users, the paper says.
Properly assess the strategic, technical and human fit
Then comes the initial discovery and selection phase. In this phase, a number of important guiding principles of discovery and selection apply, covering both partner choice but also the actual request for proposal (RFP) process.
When looking to a partner to help accelerate a growth strategy, such as future mobility, preventative health, or wealth management, it is critical for an insurtech to be able to bring proprietary expertise, intellectual property (IP), and market positioning. Conversely, the incumbent’s resources and expertise should be clearly beneficial for the insurtech.
On the technological front, it is important to consider whether the insurtech will be able to fill the incumbent’s capability gap, especially when the partnership focuses on a specific technology such as artificial intelligence (AI) or the Internet-of-Things (IoT). It’s also critical to assess the level of flexibility and customizability of their solution, and gauge whether or not the insurtech is willing to go the extra mile to tailor it.
Beyond the technological capabilities, an insurtech’s understanding of the wider business context and how to effectively work with an incumbent insurer can make the difference to their success.
Be open and honest about expectations and cultural differences
Incumbents must be pragmatic when negotiating with commercials, but must also be prepared to be patient, to educate and to explain. They must recognize that large organizations’ processes can be difficult for startups and should set expectations that are tempered with an appreciation of what is feasible for the partner to deliver.
At the same time, insurers can take this opportunity to learn more about the startup’s nimbler ways of working to help inspire cultural change.
For the insurtech, it is particularly important that they understand the incumbent’s organization and decision-makers.
Reaching that level of understanding will require key personnel in both organizations to come together, talk openly about cultural differences, share people time and build the bonds of human connection that are needed for a successful team.
Deploy strong and transparent governance
A transformation project must be governed by the project plan with milestones and owners. These milestones will be define based on the delivery methodology: either agile, which relies on a more flexible, iterative approach, or waterfall, which basically involves establishing a plan and sticking to it.
Naturally, most incumbents will tend to prefer waterfall milestones which are more tangible. Hence, the insurtech partner must be prepared to flex its methodology accordingly and should not expect to work 100% agile with a large organization that’s not agile itself. Conversely, the incumbent should be willing to take on advice from its partner, adapt, and deploy agile principles where possible.
At the end of the day, establishing guidelines for communication and decision-making with associated timings will be key to a successful partnership, and individual teams should meet on a regular basis so that decisions can be made swiftly, the paper says.
Teams from the incumbent insurer should work in line of sight of the board, and produce key data points and KPIs into their reporting. They should also prepare stakeholders in advance to anticipate potential issues before they happen.