2017: InsurTech comes into its own

2017: InsurTech comes into its own

This year looks all set to be a defining one for InsurTech. Several powerful new trends are reshaping the sector, as KPMG’s Insurance Partner, Murray Raisbeck, explains.

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Traditional talent joins the tech set

We expect to see a cross-pollination of leadership talent between InsurTech and the traditional insurance sector during 2017. A number of seasoned senior managers and executives from the insurance sector are likely to be taking stock of their careers and looking for fresh ways to make an impact. They’re all acutely aware of the need to transform their businesses, yet innovative responses are all too often frustrated by legacy challenges and snail-like progress. It’s highly likely, therefore, that a steady flow from this group will be tempted prefer to pursue new opportunities, either by starting their own InsurTech or helping run an existing start-up.

The journey will be a two-way street. We also foresee a flow of tech talent into the traditional insurance sector. Insurance boards are currently dominated by accountants, actuaries, risk and regulatory experts, with tech experience often very thin on the ground. A number of new roles were created in 2016 to combat this, such as Chief Data Officer, Chief Technology Officer and Chief Digital Officer, with people imported from outside the industry to fill them - a trend we're likely to see accelerate in 2017. 

The Brexit impact on UK tech talent

As Brexit uncertainty continues, the most pressing challenge will be continuing to attract top tech talent to the UK. That said, President Donald Trump’s overtures to the tech sector in the US may not be enough to prevent top tech talent still making its way to the UK or European shores. At the same time, we expect the InsurTech sector’s voice to be more audible at regulatory and policy-making tables, as the community expands and matures. Our hope - rather than prediction - is the sector speaks as one, in order to influence the regulatory and political agenda and ensure the sector’s future growth.

Insurers inviting InsurTech inside

We’ll also see insurance companies starting to ramp up investment so they can start to engage with InsurTechs during 2017 – with the more progressive insurers racing head-to-head to lead the way. The focus will be on:

  • Developing their partnering capability (venture teams included), by building teams able to engage successfully with InsurTech;
  • Enabling existing legacy systems to connect to Application Programme Interface (APIs) – often a major challenge - or accelerating the re-platforming of their legacy estates; 
  • Continued investment in capturing and enriching the right data. The richer an insurer’s data, the more appealing they are for InsurTech; and
  • An acceleration of ‘proof of concept’ and pilot programmes undertaken with InsurTech firms, as insurers start to understand the benefits of a much faster development cycle.

Venture Capital funding on the rise

North America will continue to drive the majority of investment from global venture funds, followed by Asia, Continental Europe and the U.K. This echoes what we have seen over the last couple of years. However, we shouldn’t discount a further mega funding round from tech giants in China keen to make their mark in the insurance market. A mega-funding round in Continental Europe or the UK is, however, unlikely.

Which tech trends will attract the most investment in 2017? The most popular will be:

  • Blockchain, particularly in commercial lines and reinsurance;
  • Artificial Intelligence such as chat bots, virtual agents and decision support for customer facing staff;
  • The internet of insurance: the impact of connectivity on insurance propositions; and
  • Tech-enabled cyber insurance solutions and services.

Where will disruption come from?

Disruption is already rocking and reshaping the industry on all sides. InsurTech firms are unbundling every aspect of the insurance value chain, across every single market. Insurance firms absolutely must have a continuous 360 degree-3D view of these developments and ensure their business and operating models are nimble enough to cope. We also predict sector convergence will speed up during 2017 - and that some of the most significant disruption will come from outside of the insurance or InsurTech markets. 

All in all, a dynamic year ahead – and one in which insurance firms need to make sure they’re on the starting blocks and ready to tackle, as new developments unfold.

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