New Zealand’s fast-growing InsurTech ecosystem provides new collaboration opportunities for insurers, start-ups
Thursday 11 April 2019
- The New Zealand InsurTech sector is emerging at pace, with 17 new market entrants established since 2017
- 63% of New Zealand InsurTechs don’t think there is enough collaboration with incumbent insurers
- 67% of local InsurTechs plan to expand into other geographic markets within the next year
New Zealand’s InsurTech sector is growing rapidly, but greater collaboration is an opportunity between new entrants and incumbent players to create a world-leading ecosystem, according to a new report released today, InsurTech Emerging at Pace.
The report, produced by EY in conjunction with InsurTechNZ, examined New Zealand’s InsurTech ecosystem in detail for the first time and found significant growth in the emerging sector, with 17 new InsurTech companies or innovation divisions established locally since 2017, tripling the previous high from 2015.
Although young – 82% of local InsurTechs were established within the last five years – the sector is optimistic about its prospects, with 83% of New Zealand InsurTechs saying they believed they would be competitive globally and 67% planning geographic expansion into other markets within the next twelve months.
The survey also found nearly half of New Zealand InsurTech companies are initially funded by their founders, with support from family and friends, and only 40% currently have capital to support them beyond the next year of operation. Equity-funding and government grants are low, reflecting the developing maturity of the sector, but represent an opportunity for more investment and growth.
Dr Graeme Horne, Advisory Partner, Ernst & Young LLP said: “The insurance sector as a whole is undergoing a period of profound change, both locally and globally. Traditional insurers are facing increased disintermediation and competition, declining levels of consumer trust and engagement, and tighter pressure on margins. At the same time, customers’ expectations are evolving, as they adopt new technologies and become increasingly digitally savvy and connected.”
“While the core value of insurance continues to resonate with customers, the way of delivering insurance products and services is changing rapidly in light of new technology development. The insurance sector has not yet embraced digital advancement at a comparable pace to other industries such as banking and retail, so there can be a disconnect between the level of service currently being offered by insurers and customers’ expectations. In this environment, New Zealand insurers have a significant opportunity to embrace the benefits of InsurTech to help them deliver better customer experience and value. However, in order to achieve this, there is a need for increased collaboration between incumbents and new entrants,” Dr Horne said.
This is a view echoed by the InsurTechs themselves. Although 72% of New Zealand InsurTechs surveyed said they were already working with an established insurer, broker or services provider, 63% said there wasn’t currently enough collaboration between incumbents and InsurTechs to successfully transform the ecosystem.
Concerns about differences in organisational culture, ability to scale, compatibility of technology systems and data security were the main barriers cited by incumbent insurers, brokers and other established providers for engaging more with InsurTechs.
“Our survey found little evidence of InsurTech start-ups and technology companies seeking to compete directly with traditional insurers. Rather, these new companies are addressing underlying problems and leveraging innovative ideas and technology to reduce friction points. They are challenging the efficiency of existing models, re-thinking the approach to risk transfer and creating innovative, value-adding solutions,” said Katharina Wichmann, an EY insurance sector professional.
“New Zealand InsurTechs are predominately focusing on improving user experience and customer engagement through marketing and distribution, followed by efficient insurance administration, and new products to address customer value propositions. In terms of technology, 25% see artificial intelligence (AI) as having the most significant potential impact on customer engagement, while 25% favour big data and analytics. This is followed closely by blockchain (20%), AI for risk and claims (14%) and connected devices including the internet of things (10%),” Ms Wichmann said.
“Increased collaboration will benefit the entire ecosystem – improving customer engagement and experience, creating efficiencies in back-end processes and, ultimately, offering more choice for consumers. The challenge now is for incumbent insurers and InsurTechs to bridge the gap and explore a ‘by New Zealand, made for New Zealand’ sector-wide opportunity,” said Jason Roberts, Chair, InsurTechNZ.
For more information and to view the full InsurTech Emerging at Pace report, visit ey.com/nz/insurtech.
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Notes to Editors
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This news release has been issued by Ernst & Young New Zealand, a member firm of Ernst & Young Global Limited.
InsurTechNZ is a member focused, ‘not-for-profit’ organisation initially formed and operates as a division of FinTechNZ which is run for the benefit of our shared FinTechNZ and InsurTechNZ members across NZ.
InsurTechNZ is also the co-founder of GITA (Global Insurtech Alliance) with a focus on actively engaging with other sector leaders, member bodies and companies around the globe.
InsurTechNZ seeks to ‘advance insurance innovation for customer benefit’ and sets out to achieve this by collaborating with start-up and early stage InsurTech focused companies, insurance incumbents, technology vendors, funders, industry bodies, the NZ government and industry regulators.
We believe in fostering an engaging environment that creates opportunities for cross-sector learning, debate and business development for New Zealand.