Why Large Insurers Must Focus on Working with Insurtechs ?
Large insurers must collaborate with insurtechs to drive innovation, reduce costs, and enhance customer-centric solutions. These partnerships enable faster go-to-market strategies, improved ROI.
In the rapidly evolving insurance industry, large insurers are increasingly focusing on partnerships with insurtech companies. Insurtechs bring innovation, efficiency, and customer-centric solutions that legacy insurers often struggle to achieve on their own. By collaborating with insurtechs, traditional insurers can benefit in several ways, including cost reduction, improved ROI, faster go-to-market (GTM) strategies, and access to innovative technologies.
1. Cost Reduction & Operational Efficiency
One of the most immediate benefits of partnering with insurtechs is the significant reduction in operational costs. Insurtechs leverage technologies such as Artificial Intelligence (AI), Machine Learning (ML), and Robotic Process Automation (RPA) to streamline processes such as underwriting, claims processing, and customer service.
Cost Reduction Metrics:
Automation of underwriting processes can reduce manual work by 60%, leading to cost savings of up to 40% in underwriting operations.
Digital claims processing through AI can reduce processing costs by 30-40% per claim, according to a McKinsey report.
Chatbots and virtual assistants, which insurtechs integrate into customer service, can handle 60-70% of customer inquiries, reducing call center costs significantly.
Case Study: Allstate partnered with insurtech startup Snapsheet to digitize its claims process, reducing claims handling time by 50% and cutting operational costs by 30%.
2. Improved Return on Investment (ROI)
By deploying cutting-edge technologies, insurtech partnerships can lead to faster and more scalable growth, enhancing ROI in the long term.
ROI Metrics:
McKinsey & Company suggests that companies that adopt insurtech solutions can expect to see a 15-20% increase in premium growth, while their cost base only grows by 5-10%.
According to a Capgemini report, insurers leveraging AI and automation report an average 3-4x improvement in ROI from insurtech-driven digital transformation.
Example: Munich Re’s Digital Partners worked with multiple insurtechs, leading to an 80% faster launch of new insurance products. This resulted in a 15% increase in revenue within the first year.
3. Faster Go-to-Market (GTM) Strategy
Traditional insurers often face long development cycles when launching new products. Insurtechs provide agility, enabling insurers to launch new offerings quickly and efficiently.
GTM Metrics:
Collaborating with insurtechs can reduce product development time by 50-70%, accelerating the release of new insurance products.
The use of digital platforms and automated underwriting can cut policy issuance times from weeks to a few minutes, as seen with companies like Lemonade and Metromile.
Insurtechs enable insurers to enter new markets rapidly, shortening GTM timelines by 40-50%.
Case Study: AXA’s partnership with insurtech platform Trov enabled the insurer to launch an on-demand insurance product for personal belongings in just 6 months, compared to the typical 12-18 months required for product development.
4. Access to Innovative Solutions
Insurtechs provide access to advanced technologies and innovative solutions, which large insurers can struggle to develop in-house. These solutions include usage-based insurance (UBI), microinsurance, blockchain-based claims settlement, and parametric insurance.
Innovation Trends:
Usage-Based Insurance: Insurtechs like Metromile are driving the adoption of pay-per-mile auto insurance, which could lead to savings of up to 25% for low-mileage drivers.
AI-Driven Underwriting: Insurtechs are leading AI integration in underwriting, reducing underwriting costs by up to 30% while increasing the accuracy of risk assessment.
Blockchain Technology: Insurtechs such as B3i and Etherisc are using blockchain to facilitate faster claims settlement, reducing settlement times by 90% and cutting administrative costs by 30%.
Statistical Impact:
62% of insurers worldwide see AI and predictive analytics as key to product innovation (Deloitte).
Insurers adopting blockchain solutions report a 15% increase in customer satisfaction due to faster and more transparent claims processes.
5. Customer-Centric Solutions
Insurtechs are known for their ability to deliver personalized and customer-centric solutions, enhancing the overall customer experience.
Customer Experience KPIs:
Customer satisfaction rates can increase by 30-50% when insurers adopt personalized digital interactions driven by AI and data analytics.
Insurtechs using AI-powered chatbots and automated claims handling have improved customer retention rates by 20-25%.
Example: In collaboration with insurtech startup Clara Analytics, Liberty Mutual used AI to improve its customer service response times by 35% and reduced claims cycle time by 15 days on average.
6. Digital Transformation & Data Analytics
Insurtechs bring a wealth of data analytics capabilities that allow insurers to better understand their customers, improve risk assessment, and refine pricing models.
Data Analytics Metrics:
Insurtech-driven data analytics can reduce fraud by 25-30%, thanks to real-time monitoring and predictive algorithms.
Advanced analytics improve risk assessment accuracy by 10-15%, leading to more profitable underwriting.
Personalization driven by insurtechs increases policy conversion rates by 12-20%, according to a PwC report.
7. Trends and Industry Data
The insurance industry is undergoing rapid digital transformation, driven by insurtech partnerships. Some key trends include:
Investment Trends: Global insurtech investment hit $15.4 billion in 2021, a 176% increase from 2020 (Willis Towers Watson).
Adoption Rates: Over 60% of global insurers are partnering with insurtechs, while 75% of insurers in developed markets are actively exploring digital transformation projects (Capgemini).
Market Growth: The global insurtech market is expected to grow at a CAGR of 34% from 2022 to 2027, reaching a market size of $169 billion by 2027 (Market Research Future).
8. Challenges and Opportunities
While there are numerous benefits, large insurers must navigate challenges like integration with legacy systems, regulatory compliance, and cultural alignment with insurtech partners. However, the potential for faster innovation, reduced costs, and increased customer satisfaction far outweighs these challenges.
Conclusion
In summary, large insurers must prioritize collaboration with insurtechs to stay competitive in a rapidly digitizing market. By partnering with insurtechs, insurers can achieve significant cost reductions, improved ROI, faster GTM, and innovative, customer-centric solutions. The future of insurance lies in the synergy between traditional insurers and insurtechs, offering substantial long-term value across the entire insurance value chain.