Exclusive: ‘The secret of a happy partnership’ – Victoria Roberts, Tech Nation in “The Insurtech Magazine”
The relationship between insurtechs and incumbents has not always been easy or mutually advantageous. But with six major insurers now signed up to the Fintech Pledge, Victoria Roberts, Director of the Insurtech Board at Tech Nation, believes it’s the start of something good
“Five years ago there was a juxtaposition in fintech – a buy versus build debate. But people in the big institutions have recognised the value of working with fintechs, and ‘partnership’ is no longer a dirty word.” So says Victoria Roberts, director of the Fintech Delivery Panel and the Insurtech Board at the government-backed business growth network, Tech Nation.
But Roberts won’t kid you that collaboration within the insurance industry is easy. Just like the wider fintech world, many projects have floundered in the last few years. When the often vastly-different cultures of startup and incumbent collide there can be messy results. In a nutshell, mutual ignorance between big and small has meant the two sides often don’t know how to work together. To that end, Tech Nation helped develop the Fintech Pledge last year, hailed as a first step in improving mutual understanding and communication. In September the UK’s five biggest banks signed up, and in April six major insurance players followed – Admiral, Aviva, Brit, Esure, Lloyd’s and Munich Re Digital Partners.
The pledge is one of many tools being employed by the Government and the financial sector to ensure Brexit doesn’t derail the country’s progress in leveraging its position as a world-leading fintech hub. To understand why insurers are also being invited to sign the Fintech Pledge and urgently implement its actions – within six months – though, it’s worth looking at a study that examined the mismatch between insurtech and incumbent. The Treasury-backed Insurtech Board, run by Tech Nation, last autumn brought together insurers, entrepreneurs, investors and consumer groups, and, with help from Lloyd’s Lab, collated views from all sides.
Established insurers complained that startups had weak knowledge of insurance products, the wider sector, and the myriad of regulations that govern processes. Sometimes even the fundamentals were misunderstood – the report highlighted cases of insurtech staff having little knowledge of how underwriters priced a product, for example. This led to frustration and ‘hand holding’ – potential clients said too much effort was often needed to turn a good idea into a workable solution. On the flip side, insurtechs said they were baffled by the ‘opaque’ processes employed by incumbent firms, and the huge due diligence questionnaires they were told to fill out.
One typical complaint was that ‘people come out of the woodwork’ to review their solution, with weeks needed for multiple departments to give approval – or veto the project. Add in what was described as the ‘culture of a slow no’, plus an absence of payment for proof of concepts, and insurtechs were sometimes left struggling to stay afloat as they fought to secure a deal. The research concluded that signing the Fintech Pledge was a logical step to improve partnerships between insurance industry players: a very public sign of good intent and a commitment to better understanding. But it also urged incumbent firms to adopt an entrepreneurial spirit within their organisations ‘to reach a point where innovation is recognised and rewarded, rather than restrained’.
A hangover from the 2008 financial crisis was pinpointed: the report said the strengthening of compliance regulation had, in some cases, created one-size-fits-all processes and fostered a risk-averse culture that meant opportunities to innovate were now being missed.
Trevor Maynard of Lloyd’s, the Insurtech Board’s head of innovation, said building an innovation culture would mean going ‘beyond scouting the best new propositions; it means the whole organisation adopting an entrepreneurial mindset, which enables rather than hampers new collaborations. It is vital we bring together insurers with insurtechs, to bridge between the inquisitive and the experienced, and to see where existing barriers are hindering relationships’.
Roberts says the Insurtech Board report and the Fintech Pledge aren’t the first pieces of work to aid partnerships, but previous efforts hadn’t encouraged incumbents to consider their own weaknesses.
“We’re in the second iteration of the Fintech Delivery Panel, or FDP 2.0,” she says. “With the first, which started in 2017, the banks worked to produce the Onboarding Guidelines. This was essentially a sort of bible for fintechs, mapping out what they might be asked by an institution when seeking a partnership.
“It was a fantastic resource, with an emphasis on what fintechs could do to prepare. However, the inspiration for the Fintech Pledge was to ask ‘what is the role the institution can then play in ensuring onboarding [of a fintech/insurtech] is efficient and effective?’. It’s really looking at what institutions can do for their prospective partners; to have that enhanced transparency and communication in order to overcome the asymmetry you get sometimes, where, for example, the institution knows it’s a three- or four-month [onboarding] process, but the fintech’s thinking ‘brilliant, I’ve got the contract’.”
Emma Huntington, CEO of Admiral’s in-house venture-building unit Admiral Pioneer, understands how tough it can be for a startup to partner with a large corporate.
“It’s not because they don’t want to work together,” she says. “It’s just because they are completely different business models.” She’s pleased to see the Pledge signed by Admiral for the benefit of her own team, sitting within, but in many ways very different from, the rest of the organisation. It ‘helps set out transparency, understanding and obligation on both sides’, she says. Culture is at the heart of the issue, and while insurtechs and incumbents can both benefit when each collaborates to create a customer-facing app, or regtech software, Roberts says people can learn much more from one another if they truly embrace their = partnership.
“I think there will always be a superior regulatory breadth of knowledge in the institution that the insurtech can really benefit from,” she says. “But the agile nature of the insurtech can also be eye-opening, and bring quite a refreshing culture into the larger organisation. Certainly, both sides have more to offer than what they agree to deliver when a contract is signed. “Institutions that signed the Pledge are global and complex by nature,” she adds.
“It is hoped it will drive a focus on innovation right through their organisations, help them ask whether their procurement, legal and strategy teams are aligned towards the important role that insurtech could play.”
The Insurtech Board study and Fintech Pledge come at a time of reflection for the UK’s wider fintech industry due to the potential for change brought by Brexit. There’s no doubt Britain can lay claim to being the epicentre of European fintech – the $4.1billion of investment made in the country last year was more than the sum raised in the next five countries combined. But at the time of going to press, the memorandum of understanding on cooperation between UK and EU financial regulators was still unsigned.
So, Britain presses on, with the government-backed Kalifa Review, published in February, helping guide development of the sector in the near-to-medium term. Changes to listing rules to attract fintech IPOs to London, ‘tech visas’ for global talent, a ‘scalebox’ and a new Centre of Finance, Innovation & Technology are among the plans. But Roberts believes the soft power of the Fintech Pledge will bring big changes from within.
She says: “My aspiration for the Pledge is that its core principles, around being clear what your onboarding process is, having a named contact and providing regular feedback, will be incorporated into each institution in a way that fits its needs. Some might use it as an opportunity to enhance the process, reduce the time to do a proof of concept; others to fly the flag for innovation and raise the internal funding available for it.
“Either way, Tech Nation will continue to encourage a wider range of institutions to join this commitment. But we’ll also keep talking to the fintechs and insurtechs about what they’re experiencing on the ground.”
This article was published in The Insurtech Magazine #06, Page 32-33
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