Why partnerships are the future of insurance

What’s the future of insur­ance? A big ques­tion with mul­ti­ple answers that we at Insurtech Insights con­stant­ly seek. While I’m no indus­try vet­er­an, I have been host­ing week­ly webi­na­rs with glob­al insur­ance lead­ers and inno­va­tors and have picked up a few ideas of what to expect. The con­sen­sus among those who have shared their time with me is that col­lab­o­ra­tion will be a cru­cial com­po­nent of the indus­try. 

There are myr­i­ad rea­sons for this. A key issue is that great cus­tomer expe­ri­ence is still lack­ing. I’m far from the first per­son to say this and doubt­less won’t be the last. The insur­ance expe­ri­ence was already fair­ly frus­trat­ing for cus­tomers pre-pan­dem­ic. How­ev­er, as con­sumers became more used to order­ing Ama­zon pack­ages from their sofas, their expec­ta­tions have changed dra­mat­i­cal­ly. 

I’ve spo­ken with enough exec­u­tives from the tra­di­tion­al car­ri­ers to know the desire to improve cus­tomer inter­ac­tions is there in abun­dance. The ques­tion, how­ev­er, is whether they can inno­vate quick­ly enough to offer prod­ucts and ser­vices that keep up with the pace of change. Part­ner­ships of all shapes and sizes will be key to enabling that great expe­ri­ence. But what does this look like?

Insur­ers will no longer be able to sole­ly rely on their promise to pay out a claim. In fact, this is one of the biggest rea­sons the industry’s rep­u­ta­tion has suf­fered of late: the per­ceived fail­ure to live up to those promis­es. 

The insur­ance of the future will be very dif­fer­ent. It will be more engag­ing, more inter­ac­tive and more like a con­sul­tant as opposed to the cur­rent wide­spread mod­el. In essence, insur­ers across all lines and sec­tors will have to fol­low a Vital­i­ty-style approach where cus­tomers active­ly ben­e­fit from their insur­ance. 

Health insur­ers will have to find a way to make cus­tomers health­i­er, auto insur­ers will reduce the risk of crash­es and so on. In short, we will move from the promise to pay to a promise to help, which is a seis­mic indus­try shift. 

While there is huge appetite from incum­bents to achieve this expe­ri­ence, they will still strug­gle to enable it with tech if they go about it on their own. This is where wide­spread col­lab­o­ra­tion will come in. With­out the faster, more nim­ble, more inno­v­a­tive play­ers, it will take insur­ers far longer to adopt new tools and engage with the cus­tomer of the future. By which time it may be too late. 

Last month Zego, a com­mer­cial motor insur­er, became the first British insurtech uni­corn with a val­u­a­tion of $1.1 bil­lion in its lat­est fund­ing round. Found­ed just five years ago, the rise of Zego is the lat­est exam­ple of why insur­ance has become one of the hottest sec­tors in ven­ture cap­i­tal.

As with every insurtech, Zego exists because its founders spot­ted a gap in the mar­ket, a prob­lem that tech­nol­o­gy could over­come. Com­mer­cial motor insur­ance is pro­hib­i­tive­ly expen­sive for “gig econ­o­my” dri­vers who work part time. Insurtechs such as Zego and Cuv­va solve this prob­lem by offer­ing afford­able pay-as-you-go insur­ance, pow­ered by sophis­ti­cat­ed telem­at­ics that reduce the cost of under­writ­ing and cov­er.

Inno­v­a­tive star­tups now exist in every type of insur­ance, mak­ing buy­ing and claim­ing eas­i­er and open­ing up new mar­kets in doing so.

In 2019 Zego acquired an insur­ance licence. Many insurtechs, how­ev­er, exist as pure plat­form plays, choos­ing to main­tain no actu­al insur­ance capac­i­ty, but instead part­ner­ing with estab­lished car­ri­ers. This allows them to bring dis­rup­tive propo­si­tions to mar­ket at speed and side­step the cost and com­plex­i­ty of being a full-stack insur­er.

These firms are the insur­ance equiv­a­lent of Airbnb; they devel­op prod­ucts and man­age cus­tomers, but hold no actu­al inven­to­ry. Some trade under their own brand, while oth­ers pro­vide white-label ser­vices for part­ners.

Zego works with the likes of Uber, Just Eat and Deliv­eroo, with access to a vast pool of dri­vers who are poten­tial cus­tomers. Skyscanner.co.uk and Booking.com cus­tomers can pur­chase COVID-19 trav­el-inter­rup­tion insur­ance pow­ered by Cov­er Genius under­writ­ten by third-par­ty car­ri­ers. “Embed­ded insur­ance” rad­i­cal­ly boosts insur­ers’ reach and puts insur­ance in front of cus­tomers when they are most ready to buy.

Estab­lished insur­ers are also get­ting in on the act. Ban­cas­sur­ance, insur­ance sold to bank­ing cus­tomers, is enjoy­ing a resur­gence. Insur­ers large and small and across every line are look­ing to build ecosys­tems of part­ners that cre­ate val­ue for them­selves and for cus­tomers.

An Insurtech Insights sur­vey of insur­ance pro­fes­sion­als, pub­lished last Octo­ber, revealed 66 per cent are already part­ner­ing with non-insur­ance busi­ness­es and a fur­ther 26 per cent are plan­ning to do so. The top rea­sons for part­ner­ship are cross-sell­ing oppor­tu­ni­ties (cit­ed by 92 per cent of those sur­veyed) and access to new cus­tomers (90 per cent).

These are inspir­ing times in insur­ance. Whether you’re a five-year-old uni­corn or a long-estab­lished busi­ness, data-pow­ered plat­forms and part­ner­ships are unlock­ing growth oppor­tu­ni­ties and are pro­vid­ing the fuel for immense inno­va­tion.