Reinsurers must learn from trailblazers

A discussion panel on insurtech agreed that there is a big opportunity for reinsurers, as insurtech partners have the right expertise, culture, and technology to prosper in their chosen areas.

Sebastian Banescu, Chainproof chief executive & head of Quantstamp Germany, speaking on the panel headlined: “Insurtech leading the charge: how insurtechs are breaking into new geographies”, said: “I guess they could learn. If they are willing to put in the human and other resources needed not just to piggyback off the insurtechs’ success, but maybe to build internal expertise, that would be a big help.

‘It’s not only reinsurers—it’s insurance companies too. They don’t have certain expertise in-house, but if they see that there’s a huge opportunity in the market, what they could do is partner with an insurtech and slowly learn what they are doing and build internal expertise.”

Jerad Leigh, co-founder and chief executive of Supercede, said that re/insurers value the expertise that insurtechs can deliver.

“They’re not going to go down the traditional chain. They’re saying: ‘here’s a great way for us to build our portfolio in this class. And here’s a very clever company, giving us the ability to do so’,” he said.

Carlos Cendra, innovation expert at Mapfre, said when the insurtech buzz started, there were concerns that they could trigger the terminal decline of traditional insurers.

He pointed to the hype around companies such as Lemonade, an insurtech personal liability carrier, and Metromile, an insurtech motor provider.

Despite concerns that these insurtechs would “wipe us off the map”, this has not happened. He said: “We need to keep watching them, and talking to them. We need to get understanding of how they do things. I don’t think there’s going to be one single winning strategy.

“In some cases partnering is going to be the way, in some cases it will be acquisition, in others a commercial agreement. It will depend on product, and the stage you are at.”

Miro Parizek, founder at Hampleton Partners, agreed that traditional insurers were here to stay.

He said: “I don’t think you’re going to see a Zurich or Allianz, or any of those kinds of companies, disappearing. They’re not going to be disrupted off this planet by the insurtech ecosystem. It’s about how they ended up cooperating with the insurtech players.”

He added a lot of the insurtechs were well-financed, but it was “not easy” for them to establish themselves.

“The big players are going to wait to see who the winners are. They’re not going to buy too many of those companies or get into that space until it plays out.

“I think we have an interesting 10 years in front of us.

“Five or 10 years ago, everyone was thinking insurers would be out of the market. Insurtechs, the new startups, were going to blow them all away. That’s not happening. It’s an interesting world out there—it’s very complex with lots of competition going on. We’ll see interesting kinds of business models developing,” Parizek said.

Looking abroad

The panel discussed the role of insurtechs and re/insurers looking overseas for opportunities.

Leigh said he was interested to see how insurtechs develop in emerging markets.

“When you look at the biggest opportunities, they are in emerging markets. That’s not only because they’ve been underserved in the past, but you look at some of the challenges that those sectors wrestle with. They are best served by this new, more efficient, more effective model.

“The comparison I’ll make is that, if you look at parts of Africa, they’re moving straight into mobile phones and cellular technology, and skipping the landline tradition.

“You can think about the broader insurance product with a similar lens. The developed economies in the west and in Europe always had that underlying framework. Protocols are built up over time. The smaller economies have never put that in place to the same degree.

“Technology is now allowing us to leapfrog that historical value chain, in a way that’s been made possible only through modern technology solutions, and I think insurtech is the same sort of approach.”

Parizek said a lot of the mergers and acquisitions were driven not so much by the opportunities in their own geography, but by the opportunity of acquiring beneficial technology overseas.

He used the example of US software giant Duck Creek, which in June acquired Prima XL, a French-based reinsurance technology solution.

He said: “That’s an example of the kind of transaction we are seeing where people go abroad. They are acquiring their technology. It was not about the geographical region. They’re not really insurtech, they are more in the B2B space. They are enabling insurers to stay relevant.”