The general trend in the global financial services industry has been shifting from disruption to collaboration[1]. While incumbents are looking for innovations, startups are looking for scale. Thus, the growing collaboration between them is delivering win-win benefits at multiple fronts across FinServ.
Leading in this race for collaborative innovation are InsurTech startups and insurance incumbents. Insurance has always been a peculiar segment where the challengers, from the start, have positioned themselves more as an enabler rather than a disruptor. According to McKinsey, 61% of InsurTech companies aim to enable the value chain, while 30% are attempting to disintermediate incumbents, and just 9% are targeting full-scale value chain disruption.
InsurTech startups have the potential to strengthen the tech infrastructure of incumbents and deliver value in terms of enhanced UX, data-driven decision-making, smart underwriting, consumer-responsive product development, etc. As InsurTech startups continue to emerge across various components of the insurance value chain and business lines, incumbents are constantly evaluating opportunities to deploy these applications in the insurance industry today and in the future. This collaboration begins with investments.
Many of the Insurance incumbents have established their own VC arms exclusively focused on InsurTech innovation scouting and investments. In the past few years, more than 75% of funding deals in InsurTech has been led by traditional insurance incumbents. Such investments enable them to evaluate the capabilities of these startup, and then go for a strategic partnership via a pilot/actual implementation.
MEDICI analyzed the InsurTech partnerships of 25 insurance incumbents. These partnerships were categorized in the following major areas of operations:
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Digital Claims Management & Fraud Detection
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Smart Underwriting &Risk Management
