Six steps for insurers and insurtechs to take an idea to maturity

Incumbents and start-ups require mastery of new capabilities to deliver the innovative, digital solutions insurance customers are demanding.

In 2020, the third annual survey of Australia’s insurtech ecosystem found two-thirds (67%) of incumbent insurers think partnerships with insurtechs will become mainstream within the next three years. However, the survey also found the use of insurtech is relatively low and insurers remain some way from maximising value creation at scale. While partnerships between incumbent insurers and insurtechs are becoming increasingly common, most are still being used for specific point solutions. 

In 2021, to address these issues, EY and InsurTech Australia ran a series of webcasts for insurtechs and insurers over a six month period. Each webcast touched on one of the steps needed for insurers and insurtechs to take an idea to maturity, hosting speakers from Insurtech Australia and EY’s global insurance practice. This article summarises the key ideas offered by the subject matter experts over the course of the series.

Creating an innovation plan

Nearly all organisations agree that innovation is key to their survival. But most misinterpret new capabilities for innovation. This fundamental misalignment drives behaviours that can lead to missed opportunities for higher rewards – or even failure.

True innovation is not about doing something new to you – but doing something that is truly new to the market. Inevitably, this requires more than incremental change. High-reward innovation comes at high risk. Insurers must accept the disruptive change of experimenting with an unproven idea.

To put some guardrails around innovation, and prevent random acts of digital duplication, an innovation plan is required to align to an insurer’s business and technology strategies.

An innovation plan offers a clear anchor for innovation and outlines problems to be solved by the program. It uses structured processes, with supporting tools and frameworks, to accelerate progress from idea generation to scaling. Importantly, it is supported by bespoke governance and funding models that reduce over-investment and align with expected financial returns.

Workforce of the future

New capabilities and skills are required to make innovation and insurtech partnering successful. Several of the critical "get rights” have a strong human and workforce elements. According to our survey respondents, these include having a strong business champion, speedy decision-making, overcoming a siloed approach and moving beyond a proof of concept mentality.^{(Ref. Insurtech, partnering to deliver value, EY (2021))}

Success will depend on transforming traditional insurance workforces to partner effectively with insurtechs. Work will become increasingly automated, specialised and able to be performed virtually. Members of the ‘new generation’ workforce will have high technology IQ, strong partnering skills and a customer focus. They will be organised to innovate, depend on information analysis and insight, and constantly look for opportunities to drive process improvement.

Increasingly, insurers will consider their workforces as “segments of employment.”

(Ref. Insurtech Playbook Series, EY (2021))

Choosing who to work with

(Ref. Insurtech, partnering to deliver value, EY (2021))

However, the ‘right partner’ is not just the inventor of a relevant insurtech solution. Detailed business and technical due diligence are essential to find the right partner. Every insurer has unique partnership needs, depending on their business vision and strategy and the consumer pain points being targeted. An incumbent’s in-house technical footprint and capabilities will play a large role determining which problems they can solve and with which insurtechs.

In our experience, as a minimum, the focus for an insurer’s technology due diligence encompasses:

Working effectively with your partner

Asked why opportunities to optimise innovation are not being met, 81% of insurtechs suggested insurers lack sufficiently detailed implementation plans to work effectively with insurtechs.

We believe problems often start right at the beginning of the partnering process. In early meetings, insurers and insurtechs need clarity about the problem they are mutually trying to solve. Both parties should be able to confidently explain: “Why this? Why now? Why would we NOT do this?”

Another early ‘get right’ is to agree on what success looks like. It’s important to take the time to develop realistic, clearly articulated outcomes that align to (likely different) benefits for both parties.

When it comes to execution, our survey participants nominated the following factors as being key to successful partnership projects:

Leadership support is vital. Our survey participants emphasised the importance of having buy-in from a senior stakeholder – someone who understands the possibilities and opportunities the insurtech brings to the table.

Insurtechs need to be ready to engage with functional experts in areas like Legal, Risk and Procurement and equipped to deal with corporate processes and procedures.

It’s a good idea to gather a team of champions with specialist skills from around the business. Look for visionaries and innovators, team players who also asks difficult questions – as well as being hands-on planners and doers who can keep up the momentum.

Rapid test and learn

The opportunities presented by emerging technologies require organisations to test and evolve new products at pace. Quite often, insurers need to shift their traditional development model to a more agile approach. 

Typically, insurtechs have more advanced rapid ideation and testing capabilities than incumbents. But insurers bring complementary assets to product development and market testing, in the form of access to test customers, extensive historical data and strong expertise in risk and compliance.

By starting with an awareness of each other’s strengths (and being consiscent of challenges), project teams can establish a rapid test and learn framework encompassing:

Adapt the MVP accordingly based on this assessment – or shut down the idea if the product fails to perform on any one of these ‘innovation trifecta’ qualities.

Proof of concept to production

Whenever possible, maintain momentum by launching new products or features early. Don’t wait for products to be perfect. Continue to iterate immediately post launch and throughout the product life cycle.

In our experience, insurer partnerships usually get the basics right as they move from prototype to production. They have an empowered product owner to continuously drive vision, design, development and rollout – and use an agile sprint model with well-defined sprint metrics. They also, generally, have code quality assurance and integrated testing in place.

What they often lack are a defined and prioritised MVP, dedicated feature teams or traceability to the MVP scope. It’s vital to have multi-disciplinary, feature-based teams of individual specialists each tasked with executing a specific feature of the MVP.

Finally, scaling out your MVP into a fully-fledged product requires its own infrastructure and, potentially, new capabilities. Your launch may need to be supported by:

• Fit-for-purpose cloud infrastructure to facilitate scale and resiliency 
• DevSecOps principles to deploy features with minimal disruption in a repeatable, reliable and secure manner 
• Consistent quality and continuous performance of cross functional teams – ingrained as a growing competency
• A methodology to scale your business and revenue model in line with value delivered to the customer