InsurTech pressuring the system: who is winning?

As written in other articles, we have the pressure of technology and capital both attracting the insurance industry at the same time.  Putting pressures from both ends of the system and value chain.  Who is feeling the pressure….those in the middle?  With InsurTech pressuring the system: who is winning?

The short term answer is the customer (and long term the capital).  InsurTech and technology pressures in general are having disruptive and deflationary pressures in many sectors of the economy.  When it comes to insurance, this pressure is coming in the form of expense savings.  These savings will translate into lower costs for the customer.

Insurance and Reinsurance companies are working on their strategy plans, maintaining relevance, and being or becoming a next century risk bearer.  This includes how sourcing risk, how to evaluate risk, balance sheet efficiencies, size/scale discussions, and most importantly expenses.  This is a monumental shift that has incumbents concerned.  They can no longer stand still and not do anything.

See also…Game Theory and Insurtech

As insurance and reinsurance companies have grown, whether they be the class of 80’s, 2000’s, and now hedge fund and alternative capital backed risk bearers, they have all grown their infrastructure, expenses, perks and compensation for those at the top.  While ultimately at the cost of the underlying customer or their capital providers.  For the recent sub-par returns that the industry has been seeing…

“The times they are a changing…”

Those firms with high expense ratios are under intense pressure from InsurTech firms  – highlighting how technology can and should solve many of the problems humans currently are responsible for as well as highlight how unprepared for data science incumbent carriers are presently.

See also…Insurance incumbents don’t have the data advantage they claim 

So who is winning?  Right now – the incumbents still have a large lead…but these pressures are coming for a reason.  The end game will result in cheaper product for the customers and true winners and losers in the risk bearing industry.    Less of an ability to hide behind scale, large margins and investment income – if you’re not the top risk bearer in your markets…you will probably see your own demise in those markets (at your own hand).

Long term, many InsurTech firms will be acquired or the technology will be absorbed into the industry.   First mover advantages are for those who embrace.   And for those InsurTech firms able to get distribution and long term customers/loyalty, while attracting risk capital…The sky is the limit.

The questions is who will it be?

Comment below with comments and questions.

If you are an InsurTech firm who wants to highlight your technology or value to consumers, please contact us – we would be interested in highlighting your value.

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Arnold Smith

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