I was struck by a recent article that called out the unstructured approach to engaging with InsureTech that a top-tier P/C insurer is taking. The company is making investments into emerging technology and looking for ways to work with InsureTechs. Areas of interest for the company include blockchain, AI, and drones. The article contained this line:
“The insurer has no established structure, such as an innovation lab or accelerator, to communicate with startups. Instead, it opts to work with and invest in industry newcomers on an ad hoc basis.”
There is a lot of talk in the industry about InsureTech venture funds, accelerators, and innovation labs. We’ve commented on these approaches many times before. In fact, there is so much hype around funds and labs that it may seem like they are the only appropriate way to wade into the startup ecosystem.
But, as the above quote demonstrates, there are other options. It’s only due to the contrast with the broader narrative that this company’s approach sounds new and different. The reality is, of course, that forming ad hoc basis relationships (say, with vendors) is how insurers have always worked with technology companies.
Insurers with smaller innovation budgets can take heart from this lesson. A company doesn’t need to earmark a $100M venture fund or dedicate a floor of space to aspiring founders to participate in the InsureTech startup boom. Instead, a company can determine which emerging technologies are important to their goals, survey the startups that are out there (by reading Novarica’s InsureTech for Insurers profiles, for example), and by picking one or two to work with. Most of these startups are looking for—some are even desperate for—pilot clients and insurance partners.
Some insurers have rules about licensing software from any company under a certain size, and even those that don’t have rules may be wary about taking on a platform that relies on a company without a large cash runway. It’s why InsureTech funds and labs help overcome this, isolating startup investment from the core business and setting up guardrails for safe exploration. An insurer who takes an ad hoc (and less expensive) approach of piloting one or two startup offerings will need to overcome those hurdles, which include utilizing the startup’s technology in such a way that they are protected if the InsureTech is ultimately unsuccessful. But, such a careful approach is true of working with large vendors as well, even if financial solvency risks are lesser.
Many of the InsureTech startups out of Silicon Valley and elsewhere are simply putting a new spin on old insurance offerings. This time it’s the other way around, with insurers putting a new spin on an old way of using technology: ad hoc startup investment really means choosing the right technology to fit a current need.
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