How Should Incumbents Respond to Insurtechs and Insurtechs to Incumbents?

InsurTech is a crowded field. There are more than 1,000 start-ups are active in the sector around the world, and they have between them substantial funding. A clear majority are looking to disrupt the property and casualty incumbents (motor insurance by the minute or the mile is the classic example) but health and life assurance are also targets. There is a group that are looking to provide a full service in which they underwrite as well as sell insurance but the majority are aiming either to do one of two things. The first is to disrupt how insurance contracts are sold. Here, mobile telephone apps, chatbots, price comparison engines, anti-fraud technology and robo-advice can easily exploit the inflexible products, legacy technologies, poor customer experience and loyalty penalties delivered by existing providers. The second is to make existing insurance processes more efficient. Here, because insurance is still highly intermediated, paper-based and plagued by fraud, incumbents are unusually vulnerable to new technologies such as blockchain, robotic process automation, AI and machine learning, Internet of Things connectivity and APIs. InsurTechs nevertheless face a formidable challenge: how to achieve scale. The strategic question for incumbents, on the other hand, is whether to compete, collaborate with or attempt to crush these challengers before potentially transformative new entrants such as Amazon enter the market.

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