Industry Insights

Insurtechs – friend or foe of insurers?

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How often have you heard the thought leaders claiming “this time it is different – this time, the insurance industry is REALLY being disrupted.” The latest chapter is the insurtech business – flexible, young startups, using innovative technologies and cool new gadgets. They often find and exploit inefficiencies in the insurance value chain, and their promise is to change the face of insurance. But will they?

That is the central question we set out to explore in the new IBM Institute for Business Value study “Friend or foe? Insurtechs and the global insurance industry”. Specifically, we were expecting one of three possible outcomes: insurtechs are truly disruptive, insurtechs are innovation incubators, or insurtechs are overhyped. To that end, we surveyed 600 insurance incumbents, 400 insurtechs, and 200 venture capital firms investing in the insurance industry.

At the risk of revealing too much, I will get to the final outcome of the study right away, and it shouldn’t be all that surprising: it is the middle one, i.e. insurtechs drive innovation. All three groups we surveyed agree on this. What else did we find? Here some highlights:

  • Eighty-one percent of outperforming insurers have already invested in or are working with insurtechs, compared to only 45 percent of all other insurers – a good sign that insurers are embracing the innovation insurtechs are bringing.
  • Still, only 10 percent of insurtech funding comes from insurers. That leaves incumbents in real danger of being stuck with the tail end of the market, and very little of the profits.
  • The three most common insurtech business models are digital insurers (26 percent), Big Data analytics and insurance software (23%), and comparison portals (21 percent).
  • Only 18 percent of insurtechs pursue a strategy of disruptive competition vis-à-vis traditional insurers, whereas 28 percent name their strategy as evolutionary cooperation. The rest are somewhere in the middle, with the majority on the cooperative and evolutionary sides.

Our respondents believed insurtechs will improve insurance in three major ways: by improving customer focus, personalizing risk management, and accelerating the creation and adoption of ecosystems. Platforms will be playing an important role in all of this, making insurance customers’ life easier – and hopefully safer.

Download the full study at And feel free to leave me a comment here on the blog.

Insurance Leader, IBM Institute for Business Value

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