Lessons in fast-paced partnerships | KPMG | CY
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FinTech provides lessons in fast-paced partnerships for insurers

Lessons in fast-paced partnerships

“Creating partnerships and alliances in the FinTech sector has all the thrills and spills of a rollercoaster ride.” Martin Blake, Chairman NSW, KPMG in Australia


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Swing giant wheel

Over the past 2 years, FinTech has emerged as one of the most active deal arenas for insurers around the world. Competition for the latest financial services technologies has become fierce. FinTech financing rose four fold to US$12 billion in 2014 alone as banks and insurers battled Private Equity and Venture Capital houses to secure the ‘next big thing’.

The rapid introduction of new technologies such as telematics and the importance of data and analytics also demonstrated to insurance executives just how quickly the market could be disrupted by a ‘good idea’ or non-traditional competitor. Yet the approach to driving innovation through FinTech partnerships is far from unified. Indeed, many of today’s more innovative insurers take a variety of approaches – often simultaneously – to secure the right portfolio of FinTech innovations. 

Taking the optimal approach

With so much activity in the FinTech sector, insurance executives are now starting to rethink their ‘optimal’ approach to investing in outside innovation. Many of our client conversations center on finding the right model or models to maximize returns from FinTech investments. 

While, once again, there is no simple ‘one-size-fits-all’ solution, the choice of ownership structure most often comes down to what insurers are trying to achieve with their investments:

  • Purchase: Those seeking to create a new customer-interaction process will likely want to exercise tight control over things like customer outcomes and service levels. Outright purchase of the technology or company might work best.
  • Partnership: Those looking to tap into a highly-technical or niche FinTech innovation may prefer to select a partnership or outsourcing model that provides access to the new technology without requiring significant up-front development costs or risks.
  • In-house, purchases and partnerships: Initiatives that impact the core of the underwriting decision capability may need to be developed fully in-house or by leveraging a combination of purchases and partnerships.  

A multi-pronged strategy makes good sense

The reality is that the marketplace is always changing, and good ideas may emerge from different sources. Putting your investment dollars and efforts into one or two initiatives, or tying your future to a specific investment model, may limit your flexibility to adapt to new market conditions in the future.

We expect to see insurers take a variety of approaches going forward to maximize their potential to succeed.

Five key takeaways

  • Understand the reason: take time to carefully consider what technologies will best respond to shifting consumer patterns and operational objectives.
  • Consider the ownership requirement: balance the need to control the technology against the benefits of nurturing a more entrepreneurial approach.
  • Don’t put your eggs in one basket: spreading your bets across multiple horses may pay out better over the long-term. 
  • Run multiple models: Incubators, labs, alliances, acquisitions and joint ventures should all be on the table and capable of running simultaneously and collaboratively to maximize investment. 
  • Watch the market carefully: have your fingers on the pulse of the FinTech sector – track new trends and potential disruptors. 

<p>© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.</p>

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