Insurance sector: “Huge differences in mindset”
Many experts predicted an earthquake in the insurance industry through InsurTechs, but this has failed to appear. Collaboration instead of disruption is the new leitmotif.
Our new update paper InsurTech 2.0 outlines the ongoing reorganization in the insurance market: increasingly, there is a close alliance between the established insurance groups and the innovative start-ups. Our Managing Director, Rupert Schäfer predicts how things will continue in the future.
Are InsurTechs still the biggest threat to insurance companies? Rupert Schäfer: No, on the contrary. They have helped and continue to help the industry tremendously to stay future-compliant.
What do you mean exactly? When the first 2012 start-ups took up the subject of insurance, some managers in the established corporations were afraid of disruption. They were thinking about Amazon and the book trade. And they knew: they are the book trade. So they invested hundreds of millions in all sorts of digitization initiatives to stay competitive. This was urgently needed, the insurance sector was lagging behind others, and in that sense, the incumbents can be grateful to the InsurTech.
Disruption did not take place: so InsurTechs failed? If you succeed in determining whether a start-up will significantly decrease market share for major players, then InsurTech will not be successful. Disruption as in the music industry, where MP3 and streaming have replaced the CD, has not yet taken place. Nevertheless, the expectations of InsurTechs for business model innovation have been high. The number and size of investments in this sector has increased steadily since 2016. Established companies are involved in strategic partnerships, knowledge transfer and securing their own ability to innovate.
Do these partnerships work? InsurTechs have recognized that as strategic partners of large companies, they have much better opportunities. After all, they have simply not been able to attract enough customers to this day. What they can do better than incumbents are fast agile development processes and radical thinking from the customer perspective. Now, that has to be transferred to incumbents and thus to the customer.
Will it work? The art will be to cope with the huge cultural differences in mindset between corporations and start-ups. This process takes time and patience. Anyone who does not take this seriously and does not accompany its company with a sustainable change management process will end up frustrating everyone: long-established IT staff to younger staff with beards and wool hats.
Curious? Click here to view the latest update paper, InsurTech 2.0!