Collaboration and partnerships with insurtechs will be critical to future success, as Munich Re’s Anthony Kuczinski pointed out in his keynote speech at InsureTech Connect.
- Kate Smith
- January 2019
CALL TO ACTION: Anthony Kuczinski, president and CEO of Munich Reinsurance America, talks of collaboration while giving his keynote speech at the InsureTech Connect conference.
Photo courtesy of InsureTech Connect
- Friend Not Foe: Rather than view insurtech startups as existential threats, carriers now see them as existential enablers.
- In Name Alone: While the industry talks about partnerships, many still treat insurtechs as vendors rather than partners.
- Come Together: Working with insurtechs to co-develop solutions is the ultimate goal.
Every high top table and seating nook in the MGM Grand's conference center was taken. Insurance veterans and newcomers jockeyed for any quiet corner—and often settled for a loud corridor—where they could speak privately.
For both incumbents and startups, the InsureTech Connect conference in Las Vegas was, above all else, a networking event. It was a chance for carriers and insurtechs to explore how they can work together. And both sides came armed with intent.
“Insurers weren't walking around not knowing where to turn. They had a real purpose to their missions there,” Sam Friedman, insurance research leader for Deloitte Center for Financial Services, said of the October conference. “They were looking for investment opportunities. They were looking for partnership opportunities.”
Partnerships and collaboration were unofficial, yet overarching, themes of this year's InsureTech Connect conference. Even the keynote speech given by Anthony Kuczinski, president and CEO of Munich Reinsurance America, was, at its core, a rallying cry for collaboration.
“If we're going to bring true solutions to the ultimate-end customer in the world that we live in,” Kuczinski said, “then we have to figure that others can help us with that solution.”
The call for collaboration shows a shift in thinking. Carriers have quickly evolved from seeing startups through the lens of “us vs. them” to viewing them as enablers of change.
“What's amazing is how fast the narrative has changed around this,” said Alex Lazarow, director at Cathay Innovation. “If you think back to fintech, the early days of fintech were all about the disruption of banks, and how innovators were going to change the game. Then it took a while for incumbents to start to build out corporate arms and investment firms, and partner.
“To their credit, insurers have moved incredibly quickly to embrace and work with startups at a much faster cycle time than we saw in fintech, and are actually learning a lot of lessons of what worked really well.”
Sabine VanderLinden, CEO of London's Startupbootcamp InsurTech, has seen the attitude of insurers evolve in the three years since her accelerator program launched.
“When we started, it was all about curiosity, observing,” VanderLinden said. “Everybody talked about the new disruptor coming into the industry. They didn't really know how to approach it.
“Now, the conversation is different. …I would say the relationship is a much more co-creative one, one where different players have the ability to add value.”
Carriers no longer view “disruption” as a negative. They want a certain amount of disruption and change. And they see strategic partnerships with insurtech startups as one way to achieve that.
“The greatest threat is not startups,” Greg Baxter, chief digital officer at MetLife, said. “I think we're recognizing more and more that startups and other companies will be helpful. Rather than a question of us vs. them, it's a question of how do you remain relevant to your customers in this fundamentally digitally disruptive world? What are you going to do to meet your customers' needs on their terms and who can help you do it?”
Insurance companies have a lot of money, and insurtechs have a lot of ideas. Neither one wants to ruin the other.
Deloitte Center for Financial Services
Carriers recognize startups pose no existential threat, as most newcomers focus on enabling insurers rather than replacing them. They also recognize that transformation does not occur in a vacuum. They can't go it alone.
“This idea of 'I have to do it all myself for it to be great,' that's a relic of the past,” Pina Albo, chief executive officer of Hamilton Insurance Group, said. “You're seeing ecosystems where you take the best of all worlds to make yourself better and your customer experience better.”
No company has the capital, capacity or capability to address all of the changes that are needed. Nor do they have all of the ideas.
“Finding partners who can address those areas or spark innovation or explore new idea horizons is critical. We view startups as critical to that,” Baxter said. “And I think the industry increasingly sees them as critical.”
As a result, partnerships are on the rise. At the very least, talk of partnerships is on the rise.
The term partnership is used so widely that it begs the question: What does it really mean? A partner is not simply a vendor, experts say. Or at least it shouldn't be. But many carriers still treat insurtechs as such.
“The overall relationship between insurance companies and technology companies, most of them are now customers of vendors,” Friedman said. “That's how some insurers still see insurtechs—like they're a fancy word for another type of vendor. They've got a product they're trying to sell.
“When you think about a vendor-customer relationship, it's transactional. The vendor is expected to maintain and improve a product. The customer buys it or leases it. If I don't like your product, I can go to another vendor when my contract is up.”
Partnerships, on the other hand, can take on several forms. A carrier might be a passive investor, putting money into companies that intrigue it in hopes of having an inside track if the company succeeds. Perhaps they invest to get a seat on the board, where they watch from the inside. Or they could be co-developers of products and solutions.
There are many examples across the industry of co-development. Progressive and Bold Penguin partnered to build a small-commercial business portal. XL Catlin partnered with Slice Labs to create an on-demand cyber insurance product. And Munich Re partnered with Betterview on a claims solution.
In his keynote address, Kuczinski used the project with Betterview, an insurtech that provides drone imaging, as an illustration of how Munich Re has used collaboration in its own business. Munich Re's innovation lab team wanted to use aerial imagery to speed up the claims process after a catastrophe. So it reached out to the claims team at American Modern, one of its subsidiaries, and it reached out to Betterview. Rather than simply using Betterview's technology, they brought Betterview into the lab to help develop an artificial intelligence program that triages claims.
“We're trying to create a better outcome, bring the insured from harm to whole a whole lot quicker as a result of a catastrophe,” Kuczinski said. “That starts with better imaging, better data, better coding of information. To get all of that together, it takes partnership. It takes reaching out to others.”
This idea of co-development is key, Baxter said. In September, MetLife Digital Ventures announced a strategic investment in Enigma, a data-as-a-service company. Enigma, Baxter said, was a perfect fit for a partnership. The startup has a rich depository of public data that, when combined with MetLife's internal data, provides fresh insights that will help MetLife in three domains—prevention, recovery and asset pricing.
“Partnerships for us are about building out transformational opportunities for both parties,” Baxter said. “It's very much a two-way street for the incumbent and the startup. I like the saying: 'Industrialists need to learn to innovate and innovators need to learn to industrialize.' There's a need for incumbents to innovate and innovators to industrialize. Both parties have to bring skills and capabilities to the opportunity.
“The incumbents provide the deep domain expertise, the capital and the scale of distribution. Innovators need to bring first-mover advantage, new technologies, new ways of accessing the market, and a cultural change, a different way of thinking about things.”
Rather than a question of us vs. them, it’s a question of how do you remain relevant to your customers in this fundamentally digitally disruptive world? What are you going to do to meet your customers’ needs on their terms and who can help you do it?
Though collaboration is the buzzword of the moment, true partnerships remain aspirational in many respects.
“There are still some roadblocks that are inhibiting effective collaboration,” Friedman said. “Collaboration is more than just a state of mind. State of mind is important. But it's more than just flicking a switch and all of a sudden you're effective collaborators.”
A lot of the hurdles involve organizational issues. Because insurance companies are managed by line of business, collaboration must occur internally before it can occur externally.
“Collaboration doesn't just mean collaborating between the insurance company and the insurtech; there has to be collaboration and cooperation within the insurance company itself,” Friedman said. “An insurance company has a lot of different components, often operating independently. You have lines of business. You have IT, which is surely a key player here. It's a technology issue. But who's driving the bus?
“You also have investment arms within the insurance entity. Some of them have created venture capital funds just for this purpose. They're creating innovation labs to build some of these solutions themselves. So how is this all being coordinated? You want to be sure your investment arm is not looking to invest in or buy a blockchain insurtech at the same time your innovation lab is building a blockchain solution.”
Ted Stuckey, managing director at QBE Ventures, said part of his team's role is to facilitate the relationships between QBE and insurtechs.
“What we don't want to have happen is go out in the market and find out startups are struggling to work with QBE because of whatever sort of institutional processes we have,” Stuckey said. “So our job at QBE Ventures is to really streamline that.”
Friedman suggests assigning a cross-functional team that has purview of all this, can see across the company what is being done internally or externally, and can eliminate any barriers that come up.
“They can see and prevent conflicts from arising,” he said. “You need to have some internal coordination. You need sort of a central clearinghouse.”
Defining expectations and goals for partnerships is another challenge.
“You should have a clear idea going in of what you're looking for,” Friedman said. “And one of the challenges is setting expectations once you're in with these folks. What does success look like if I work with an insurtech on investigating claims and underwriting and rating? Are we going to judge it on the speed of closing the transaction or on the number of transactions? Are we looking at the loss ratio? What are we looking at?”
These speed bumps on the road to collaboration are expected, experts say, and have not dampened carriers' excitement to work with insurtechs.
“It's a very symbiotic relationship right now,” Friedman said. “I haven't seen a lot of tension between the two, but it's a learning experience for both. They're growing together and figuring this out as they go along.
“Insurance companies have a lot of money, and insurtechs have a lot of ideas. Neither one wants to ruin the other.”