Across the multiple conversations I have had at events, conferences and meets, similar questions as stated below are being asked about InsurTechs:
1. What does an Insurtech mean?
An Insurtech, as the name suggests is someone who uses tech to improve a certain part of the value chain.
Insurtechs no longer talk about disrupting the whole industry as it is simply not possible by one player. In the same light, Insurtechs don't mean direct-to- consumer alone!
It boils down to simplifying experience! In our case - it is customer experience for lifestyle solutions like travel.
2. Insurtechs don't make money! You just burn it!
Unfortunately, this is partly true! And not true for everyone as well. Traditional Life Agency businesses took almost 10-15 yrs to break-even on a channel basis. Today we seem to have lesser patience. A bit of an extreme version and demanding returns in 3 and 4 yrs vs. What we saw a year or so ago, where significant funding went into companies that went belly up a few months later! A Singapore based regional aggregator comes to mind.
Neither was that model right of money following dreams, nor is this model of wanting overnight returns the right one.
Bottom line - Businesses need patience!
After a point, any story you place or build devoid of real business will be found out. Businesses run on 170+% combined ratio, using newer terms like sum assured instead of premiums or gross margins instead of Combined ratio and talking about being an Insurtech when essentially one is a business introducer or connector, just wont fly for long!
Businesses built on strong foundations will always find a way. E.g. claims fraud engines, niche tech players who solve specific issues like cyber insurance. These businesses are here to solve a real problem and are built around good people and support systems.
3. Direct-to-consumer is the future and hence, traditional models won’t survive; None of these Insurtechs will survive and they will all fail once funding stops.
Loaded views from loaded folks is all that I can say.
Bottom line is that most pure-play D2C models have failed (barring some early successes in US, UK, etc.) due to cost of acquisition and challenges around anti-selection.
Hence, many moved towards a partnership model where one leverages on partners who have access to a captive base and to be able to offer embedded solutions on a frictionless basis to their customers. E.g. buying travel insurance with a ticket or device protection with gadgets. No different to what banks did for decades when they attached home insurance with a loan. The difference today is that since the products are fully digital with no individual level of servicing, price tends to be lower and yet viable.
However, a customer who wants to make material protection decisions will still want to talk to an Advisor. And that’s where professional education, experience, etc counts. But this model cannot service pure transaction based businesses in the traditional way either. Hence, the link between tech and advice becomes vital for all parties.
Most traditional businesses will survive as they are generally over-governed and micro-managed by regulators, board and various internal systems. This is a good thing for customers and financial industry needs stability.
However, very few will really differentiate/ innovate for that fear and thats bad for customers.
There is always a flip side of being strict parents at home as they say ;)
This is where InsurTechs help as they have to differentiate to survive. In that journey, most Insurtechs will fail or be consolidated as well.
But, that’s just the way business will evolve and mature. The future remains that of multi-channel. Some will go deeper into specific channels, while others will be everywhere. But, customers will continue to decide based on life stage, need, convenience and above all impact on their lifes... Majority of retail mass products will be commoditised and distributed digitally. While, majority of emotional/material financial decisions will be backed by human intervention, even if AI may simplify large parts of it....
What do you think? Do share your thoughts
2 comments:
Simplifying the insurance process through online platforms is essential to reach a broader audience, but many individuals will still seek human guidance and expertise when making significant insurance decisions.
Are you seeing a situation where, in customer acquisition, the costs tied to technology operations (TechOpex) are as high as getting pretty similar to what traditional businesses spend to reach their target audience?
Beautiful explanation of what an insurtech is and pretty candid admissions on the view about insurtech and the need to have patience to realise profits. I feel a combination of assisted distribution models where a certain degree of expertise is delivered by human experts combined with intuitive yet sharp experience on the foundation of technologies like GenAI is experienced by the customers w.r.t either the solutions or post sales services is the way to especially for the more sophisticated products both in Life & Non Life insurance.
Post a Comment