Insurtech Companies New Fintech Leaders, Few Insurers Prepared for Emerging Tech, Messages from Increased Software M&A, Lemonade Announces New Funding, InsurTech Challenges and Opportunities for Insurers
INN: Insurtech Companies Are The New Fintech Leaders
Funding for insurance technology startups is outpacing the sector as a whole, according to industry analysis.
So far this year, the insurtech sector, which includes companies creating new underwriting, claims, distribution and brokerage platforms, as well as enhanced insurance-specific, customer-experience offerings — has seen 47 venture capital investment deals totaling $1 billion, compared to 74 deals totaling $2.5 billion in 2015, according to “Pulse of Fintech,” a quarterly global report from KPMG International and CB Insights that explores equity transactions to venture capital-backed financial-technology companies.
That’s despite the fact that for the fintech sector as a whole, deal activity fell in Q2, hitting a five-quarter low in the United States with just 97 deals, compared to 130 in Q1. Fintech startups also saw funding decline to $1.3 billion in Q2 2016 — compared to $2.4 billion for the same quarter last year — and drop 24% compared to $1.7 billion in Q1. Globally, funding for fintech startups dropped 50 percent in Q2 largely as a result of declining investment in Asia, where funding to VC-backed companies dropped to just $800 million in Q2 from $2.6 billion in Q1, despite a rise in the total number of fintech deals. Read the full article now…
INN: Only One in Five Insurers Prepared for Emerging Tech
Today’s blistering pace of technology innovation is proving too much for the insurance industry to handle, according to a report released by Accenture.
In its study, “Thriving on Disruption—2016 CSO Survey: Insurance Key Insights”, Accenture interviewed 561 chief strategy officers from 10 industries, including insurance, telecommunications, banking and retail. It found 94% of insurance CSOs believe emerging technologies will continue to impact their business over the next five years. These technologies include: automation, machine learning, artificial intelligence, cloud and big data.
Just 18% of insurers, however, acknowledged they are fully prepared for the change. To be sure, the case is the same for all nine other industries mentioned in the report.
“The pace of innovation right now is at an all-time high,” said John Cusano, senior managing director and global head of insurance at Accenture. “In response, companies can either partner, do nothing or try to modernize themselves. Though, it [self-modernization] will not help them stay competitive.” Read the full article now…
INN: Messages for Insurers and Vendors from Increased Software M&A
The Guidewire acquisition of First Best should come as a wakeup call to other suite vendors in the marketplace. Not to be a doomsayer, but the reality is the market for core system replacements is shrinking. Many carriers are in the middle of a replacement or have already completed their replacement. There are fewer and fewer deals to be had and more and more vendors in the marketplace chasing those deals.
Let’s look at the numbers. Donald Light’s recent PAS Deal Trends report shows that we’ve seen an average of around 85 deals a year over the last two years. But there are more than 60 suite vendors out there. Of those available deals, a very few key vendors – including Guidewire – will likely get half or more of them. That leaves around 40 deals for the remaining 60’ish vendors. That’s less than one each. And that’s IF we assume the market will stay steady at 80-85 deals a year. This basic math shows that many core suite vendors will not get a single deal in 2017. So how can vendors satisfy their shareholders? How can they generate growth and remain viable players? The truth is some of them won’t. But smart vendors are thinking about other options for growth. And they have a few paths they can take. Read the full article now…
IIReporter: Lemonade Announces New Funding from XL Innovate
Lemonade (New York), which describes itself as the soon-to-be world’s first peer insurance company, has announced that XL Innovate (Menlo Park, Calif.) has made a significant investment in the company, and that Tom Hutton, managing partner of the firm, has joined Lemonade’s board.
XL Innovate is a venture capital firm focused on technology-driven innovation for insurance. XL Catlin, the main investor behind XL Innovate, led Lemonade’s reinsurance program.
“Tom is the only person I’ve met who speaks both insurance and tech like a native,” comments Daniel Schreiber, co-founder and CEO, Lemonade. “For a full-stack P&C InsurTech company like Lemonade, his expertise is uniquely valuable.” Read the full article now…
PC360: InsurTech: A Challenge to and Opportunity for Insurers
While the insurance industry has remained much the same for more than a century, the status quo cannot endure.
Established insurers have been able to slide by with incremental improvements, but new entrants are demonstrating that approach isn’t enough anymore.
Three of the biggest drivers of change to the industry include:
- Customer expectations –Customers expect convenience and transparency, and have greater ability to find it than ever before.
- Pace of innovation – So far, incremental innovation has helped insurers meet most new customer expectations, but it hasn’t been enough to adequately address the shared economy, usage-based models, and/or risk prediction. In this context, customers have a need for new insurance solutions, but incumbents are struggling to provide them.
- Start-ups – New, lean players that have the ability to innovate quickly — notably InsurTech innovators — are taking advantage of the opportunity to fill the gaps that incumbents have not.
INN: Insurance Staffing Reflects Changing Industry
It seems insurers can’t win. Criticized for being stuck with traditional (read outdated) technology systems and processes, they are now losing the labor force that makes those systems and processes work. We all know that this is largely due to the growing number of retiring Baby Boomers, who are taking a vital knowledge base with them. It may sound like yet another great reason to modernize, but the reality is that modernization takes planning, budget and time, and those insurers that have not yet addressed the need to update their technology platforms will face similar issues: fierce competition for the talent that’s left.
Those that do choose to modernize face other labor issues, namely, that digital automation may also be creating a vacuum of tech-related talent in our industry. For example, I read with interest a report from U.S. Bureau of Labor that estimates employment in insurance underwriting will decline 12% between 2014 and 2024. The assumption is that straight-through processing, digital environments and changing expectations of the underwriter’s role may make the job as we know it today obsolete. Read the full article now…
INN: Insurers Must Respond to IT Talent Shortages
There’s an ongoing mismatch taking place across the insurance industry. IT budgets are rising – but companies are still starving for talent that can help them transition to the digital era. A recent PwC survey found that 70 percent of insurance CEOs say skills shortages are inhibiting their companies’ growth.
The other side of the challenge is that insurance companies are competing with many tech companies – the Googles, Apples and Amazons of the world – as well as countless startups. The challenge for insurance IT managers is to sell their workplaces and companies as cutting-edge opportunities for IT professionals – in the face of perceptual issues as the insurance industry being staid and conservative. (We know this is no longer true, given the acceleration to digital and insurtech, discussed here at INN.)
In a recent examination of the challenge with IT skills shortages, researchers with Harvard Business Review Analytics spoke to a number of IT leaders across various industries about their approaches to attracting and retaining the skills they need to move forward. Read the full article now…
Carrier Management: The Hanover Launches Pay-As-You-Go Option for Workers Comp
The Hanover Insurance Group has launched a new pay-as-you-go option for workers compensation policies that allows insureds to pay their premiums in real time, based on payroll.
Hanover EZPay gives businesses the ability to pay premiums as part of their payroll processes, the insurer said in a statement, either by self-reporting at the end of each pay period or by linking the product with their payroll company.
“Hanover EZPay allows agents to provide their clients with increased flexibility and peace of mind by offering a payment option that fits with the flow of their business,” said John C. Roche, president of commercial lines at The Hanover. “For many agencies, this also helps increase customer satisfaction and retention, making it beneficial for both the agent and the customer.” Read the full article now…