This according to a recent Growth & Innovation in Insurance Report put together by our team at Pancentric Digital. No great insight you might say…big behemoths will grow less than smaller, more agile start-ups…so what? Well — it’s not quite as straightforward as that.
Clearly Change is Happening
No doubt about it — the insurance Industry is changing, and changing fast (for insurance).
More accurate and timely data, advancing digital capabilities and changing customer expectations are some of the disrupting factors starting to shake up a traditional Industry.
Adjacent sectors — particularly (open) banking — have piled on the pressure, pushing faster and harder on flexible new customer experiences.
The last decade in particular has seen many companies, both new and established, striving to do things differently — introducing new business models, channels to market, products, and ecosystems, that challenge the way things have always been done.
More Money (and Pressure) on InsurTechs
The growth of Insurtech in recent years has been no secret.
World-wide funding commitments in Insurtech hit a record high of $6.37 billion last year, proving it to be more than just a buzzword. The growth has been incredibly swift, as this funding represents a staggering 33.9% of all previous global Insurtech investment.
Unsurprising that 67% of Insurtechs surveyed in our industry report are targeting over 20% revenue growth over the next two years. And to drive this growth, a big focus on distribution — 30% higher than any other group.
The pressure is on. Insurtechs have their work cut out to prove the ‘do-ability’ of their propositions and that they can scale the models and deliver meaningful volume.
Peer a Bit Closer — There’s more to it
Peer closer and you realise its not just the slow-moving behemoths in one camp and agile innovators in another and never the twain shall meet.
No — things are far more connected.
For some time now, established insurance players have recognised the rise of Insurtech as an opportunity, rather than a threat and showed an eagerness both to be involved in and to support the growing community of innovators.
You only have to follow the money.
For the talented and the lucky that get noticed, collaborations with an incumbent have much to offer. Aside from the money, get it right and there are many benefits in tapping into years of insurance expertise, not to mention customer access, and more.
And MGAS — An old model reborn
And it’s not just the Insurtechs.
MGAs are an overlooked category on occasion, but make up one of the insurance industry’s fastest-growing segments, both in the UK and globally too.
MGAs now represent up to 15% of global speciality insurance risks placed in the London and U.S. markets, a figure that has nearly doubled since 2012. Add the growing traction of the “delegated underwriting model” into the mix as well and the result is impressive. Taking this into account, the fact that 59% of MGAs in our Growth and Innovation Report were targeting over 20% growth in revenue before 2022 sounds about right. Modest even.
Significantly, without the yolk of having to provide capital or reinsurance provision, MGAs can focus on delivering the right thing to customers at the right time.
Many savvy start-ups have spotted the potential held in the MGA model to get products to market quickly and with less hassle, and this has not escaped the attention of VCs either.
So there you have it…
The apparently modest growth ambitions of insurers doesn’t necessarily mean that growth ambitions aren’t present or taking place, they’re just taking place in different ways.
Insurers have irons in all sorts of innovation fires that promise bullish growth.
And while the irons warm, little by little they will also transform their mothership operations, gradually improving, digitising, teasing out new efficiencies — and, with mounting market pressure, installing better connected end-to-end customer experiences.