Breaking News
Will insurtech always need the traditional insurance industry?
By Anna Carless, Head of Marketing, Anansi
Traditional insurance and insurtech can and will continue to operate in the same space as one another and with one another. It’s important to understand what both parties bring to the current insurance landscape and that they aren’t always necessarily competing, but more often than not, intrinsically linked.
We’re living in a changing insurance ecosystem with macro level influences driving the emergence of new players, enter insurtechs, who are challenging traditional market assumptions. Macro level key market trends influencing this shift are many: technology, digital engagement, innovation, customers and distribution channels.
Digital engagement drives expansion of distribution channels
During the pandemic, lockdowns and social distancing catalyzed the digitalisation and expansion of distribution channels across all aspects of life. Insurance is no different, albeit a little slower to adapt to meet customers’ increased expectation for a digital experience.
Traditional insurers have and are increasingly adopting, and some grappling, to implement digital technologies to meet these evolved customer engagement expectations, but updating internal processes and distribution channels in insurers takes time. Most are having to spend time patching up old distribution systems as well as trying to build out new core systems for new products and services, with a large proportion of their budget spent on maintenance of existing distribution channels. On the other hand, insurtechs are building a digital experience from the off, oozing agility, speed to market, and automation.
Trends in digital engagement demand a need for a change in insurance distribution
Traditional insurers typically rely on agent and broker distribution channels, whereas insurtechs are creating embedded insurance experiences that meet customers on their terms, when and where they need insurance. Agents will continue to remain valuable and critical to the insurance ecosystem due to the customers’ placed trust in them but traditional insurers can not ignore the fact that customers now expect a broader array of digital channels.
Forward thinking traditional insurers are in the throes of improving their distribution recognising it’s critical to growth. Some are taking this on alone, some partnering with insurtechs who have already established a digital and embedded distribution channel and an active digital customer base. But it’s not just about the value insurtechs offer traditional insurers, it’s symbiotic. Insurtechs often need traditional insurance to underwrite, provide insurance capacity and leverage the umbrella of regulation provided by long-established insurers.
It’s a win-win relationship bringing benefits to both parties.
Embedded insurance will not replace agents and brokers but the future will see the market share of embedded insurance growing at a much higher rate than those of agents and brokers.
And it’s not just because embedded offers customers an improved digital customer experience, it’s also more efficient than traditional distribution channels, or even direct digital distribution, because it does not incur sales or marketing costs to generate demand via adverts or other means. By partnering with an insurtech embedded insurance distribution partner, traditional insurers can reduce customer acquisition costs by no longer paying to drive traffic, they simply pay for the number of policies sold. It’s also an interesting concept when it comes to both competition and access to customers. By embedding the insurance offering into the purchase, the insurer does not have to compete for the customers in the wider market place, and has direct access to a customer base they would not have been able to access themselves.
E-commerce merchants seek fast, flexible and friction-free customer experiences
E-commerce look to use insurtechs vs traditional insurers based simply on the fact the customer experience is far superior. Faster, fairer and more flexible. Anansi, the insurtech offering an embedded goods in transit insurance distribution platform, for instance, offers merchants a 10 x improved claims experience that is automated and friction free, removing the need for merchants to lose precious time and dissipating user friction.
Not all traditional insurers will adapt quickly enough
Traditional insurers not only need to retain current policyholders from distribution channels of old but they must also retain the best of the brokers and agents who bring a large slice of business whilst building out digital distribution channels. Nurturing the health of each channel is complex. Traditional insurers need to quickly adapt to the changing marketplace, assess their distribution strategy and go to market approach to make sure solutions address the entire distribution value chain and an increasing diversity of channels, but there will be those that don’t meet market demand, can’t change fast enough and will sadly fail.
Insurtechs can act as a catalyzing agent to help insurers meet the evolving needs and landscape.
Made possible by MVPR
Read more of the latest stories in Insurtech news here
- Cavendish Appoints New Head of Equity Strategy Read more
- Broadridge Appoints David Fellah as Vice President of AI Trading Solutions Read more
- New Fintech Attara Seeks to Bring Financial Certainty to UK SMEs Read more
- FinMont Announces Strategic Partnership with Leading African Payment Processing Provider, iPay Read more
- Intesa Sanpaolo and Visa Renew Strategic Partnership Read more