Macro-economic trends are creating an increasingly complex operating environment for global businesses. Whether it is the changing workforce, climate change, supply chain, geo-political risks, cyber attacks or intangible assets, there is a growing number of uninsured and under-insured risks. Traditional models are unable to cope with this changing demand. In the next decade, we will see the rise of new insight-driven and digitally-enabled business models.
Insurers have come to realize that this systemic change will require innovation and new partnerships to address these changing risk profiles and meet their customers’ expectations with relevant products. They have responded by participating in the innovation ecosystem through internal development or digital labs, accelerators or consortiums, partnerships with emerging technologies, and/or strategic corporate venture capital (CVC) investments. This evolving innovation ecosystem will separate winners from losers amidst the growing list of emerging tech companies, as we monitor which new business models lead to a direct impact on growth and which fail to deliver.
Non-insurance sectors to play a bigger role in InsurTech
The last decade saw the rise of InsurTech which challenged the status quo and sought to address the inefficiencies of the current model. This then evolved from disruption to collaboration with a focus on digital experience, product design, underwriting and claims. Looking forward, we expect greater collaboration beyond InsurTechs, attracting technologies from multiple industries – fintech, oil & gas, construction, transportation etc – that can be applied to be relevant to insurance.
More breadth in data partnerships will enable multi-dimensional decision making
TWith the entire ecosystem shifting from disruption to collaboration, in the next decade, successful emerging partnerships will focus on return on investment and creating value for clients. While tech giants gear towards disintermediating existing players, brokers will become more efficient and seek partners that will enable insight-driven information and advice. The power of data will enable insurers to shift underwriting from traditional historic loss data to a multi-dimensional approach including remote sensing devices, telematics, wearables, satellites / drones, social media, open sources, dark web, hyper-localized weather and parametric data.
Appetite for acquisitions will catch up to investments in 2020s
With recent IPOs like WeWork, Uber and Lyft failing or getting off a sluggish start, we expect unicorn emerging tech to continue rising in valuations without going public. We do not expect there will be a slowdown in securing private capital from established VCs and CVCs. In the last decade, acquisitions were slow to catch up with the levels of investments, however, this will change. Prudential’s USD2.35 billion acquisition of Assurance, Aon’s acquisition of CoverWallet and Insurity’s acquisition of Spatial Key signal towards a transformative M&A playbook aligned towards a broader corporate vision. Incumbents are transforming themselves into analytics companies to address and adapt to the emerging business model.
In conclusion, the 2020s will prove to be successful for insurers that can show distinctive ability to collaborate and successfully productize solutions. Equally, this decade will belong to emerging techs which can create a compelling value proposition for incumbents to drive efficiencies and profitable growth.
So how can an emerging technology company become a winner within this developing ecosystem?
The 2020s will witness the winners displaying a clear set of characteristics that will differentiate them from the crowd:
- Work out a value proposition that clearly focuses on an unmet need, which is differentiated from competitors
- Design a model that focuses not only on customer acquisition but the actual ability to scale and generate profits
- Deliver a truly transformative idea that will disrupt the existing insurance value chain
About the Author
Preeti Asthana is Head of Global Programs – Innovation & Partnerships at Aon. She is responsible for managing innovation programs globally across Aon and developing partnerships with the emerging technology ecosystem. Preeti has a background in business strategy and consulting. Prior to joining Aon, Preeti worked at Bain & Company, a global management consulting firm. She holds an MBA in Marketing from University of Delhi, India and a Certificate Program in Project Management Strategy from the University of Chicago.