Four commercial themes to watch
InsurTech firms that can meet insurance companies’ critical business needs in areas such as data analytics, increasing scale or using technology to differentiate the brand, will be positioned for success.
Four key commercial themes driving investment activity are:
1. Growing third-party technology spending
Replacing legacy homegrown systems with third-party solutions is now recognized by most carriers as the fastest and easiest way to access innovative capabilities. The P&C industry is expected to continue to improve speed to market with new products and coverages by shifting more of its core systems to cloud-based solutions run by established service providers.
2. Prioritizing automation
Embracing automation with new digital tools has been made easier by advances in robotic process automation (RPA) and AI-driven analytics. The insurance industry’s hunger for greater efficiency can fuel a strong market for smart bots, automation to alter coverages, and other customer-facing solutions.
3. Monetizing big data assets
Distilling increasingly large troves of proprietary and third-party data into usable insights can give insurers a competitive advantage. Insurers with business models that rely on data-driven insights to enhance customer value are embracing InsurTech solutions that can automatically procure, validate and incorporate third-party data into pricing models.
4. Enhancing cybersecurity and RegTech
The growing frequency and costs of security breaches, as well as heightened regulatory scrutiny, have pushed carriers to embrace more sophisticated compliance and security solutions. Insurers are partnering more often with InsurTechs to help protect their platforms or detect silent cyber exposure across lines of business.
What InsurTech investors can do now
In an investment space as large, active and expensive as InsurTech, competition for the best ideas is fierce, challenging investors to stay ahead of the curve and make the right funding decisions at the right time.
The key to success is quickly and accurately identifying and nurturing firms and ideas that best meet customers’ current and emerging needs and help carriers pursue new avenues of growth. Key actions to consider include:
Strengthen commercial screening capabilities
- Developing a customized rationale for screening emerging technology and commercial capabilities can give investors the best chance of moving the needle. Screening criteria may include factors such as the level of automation and cloud native applications within the business.
Enhance financial diligence
- Evaluating business models for high revenue concentrations from specific products, customers or geographies can help investors avoid potential risks.
Drive clarity with external partnerships
- Working with accelerators, incubators and research universities or leveraging in-house venture units can provide insights into the InsurTech innovation pipeline, driving successful investment decisions.
How EY-Parthenon can help
Digital transformation
We collaborate with insurers on technology transformation programs and the deployment of digital tools. From concept to implementation, we work with you to develop strategies that optimize performance, drive efficiency and enhance quality.
Read moreJared Kwait, a director at EY-Parthenon, Ernst & Young LLP, contributed to this article.
Summary
Investors can capitalize on rapid InsurTech market growth by correctly and strategically identifying and funding firms that address insurers’ current and future critical technology and commercial challenges.