As I look back on insurance innovation in 2016 and forward to 2017, the insurtech phenomenon looms large. But, the sight in my rearview mirror is very different from the road before me through my windshield.
Behind I see great excitement, new patterns of interactions, and intriguing applications of technology. I also note unwarranted claims of massive industry disruption and extensive business model revolution. The last few months have brought some more measured discussion, especially around new partnerships. (For research data on incumbent-startup partnerships, see the Celent reports Accelerating Insurance Transformation: The Good, the Bad, and the Ugly of Innovation Relationships (Jan 2016) and Insurer-Startup Partnerships: How to Maximize Insurtech Investments (June 2016).)
It may take until the middle of 2017, but I expect to see a move away from hype and to value. In some cases this will be positive value; in others, it will be learning or failure (in other words, negative value). Several levers are in motion:
- There are more players, and thus a greater chance of success (or failure).
- More time will have passed for propositions which are currently online to produce results.
- More efforts will come to production in the next few months; and for other initiatives, the time (read money) to prove their hypothesis will run out.
- There will be increased recognition of the importance of partnerships as the tedious work of integration proceeds.
- From a macroeconomic standpoint, interest rates in the US will rise, increasing the attraction of alternative investments and making the competition for investment more fierce.
- Finally, Brexit and a new US political administration will result in increased uncertainty, which will change risk attitudes.
These challenges will be good for insurtech as they will prove that the easiest thing to do in innovation is to “write a check.” The majority of the difficult work of making insurtech part of a comprehensive insurance innovation approach is in front of us, and 2017 will be the pivotal year when the winners make this happen.