What exactly is innovation anyway?

Insurtech. It’s everywhere. It’s inescapable. It’s all-consuming. But… is it actually innovating?

What emerged as a brow-furrowing buzzword just a couple of years ago – back when the debate still raged over it should be spelt “insuretech” or “insurtech” – is now a sizeable industry.

So far, much of the focus has been on transforming or disrupting insurance sales and distribution channels, as well as addressing new areas of emerging risk. In fact, insurance premiums generated by emerging insurtech services are forecast to exceed $400 billion by 2023, up from an estimated $187 billion in 2018.

Those are big numbers. But there’s a snag – the same study also found that, while traditional insurance business models are transforming thanks to insurtech, the adoption of these technologies has been limited due to relatively slow rates of innovation within the industry.

In fact, insurtech is expected to represent under 10% of the global insurance market by 2023, compared to approximately 4% in 2018. This is not an impressive adoption forecast, particularly compared to the value of the premiums.

That’s interesting. I thought insurtech was innovation… or innovating… or that the two were inextricably linked. So what’s going on here then?

Better solutions for new requirements – the big four

One definition of innovation is the application of better solutions that meet new requirements. What are the new requirements of global insurers? Here are the big four:

• Agility and confidence in bringing new products to market; straight-through solutions from policy inception to claims. It’s all well and good having an idea for a new insurance product in a new sector, but can the business administer it efficiently at scale?
• Automatic compliance with local regulations and global controls in an ever-shifting regulatory landscape.
• Multi-channel capabilities that flow seamlessly, including broker channels and direct channels.
• Combining personal lines with commercial and other lines; clear pathways for cross-selling opportunities and rewarding customer loyalty.

It’s clear to me that developing new sales tools and new distribution channels only solves the front-end aspect of these requirements.

The fast pace of change is the biggest challenge facing insurers. Solving this challenge is the innovation that global insurers need right now. And only a smart SaaS architecture will enable P&C carriers to achieve this essential digital adaptability.

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