Speaking on an Intelligent Insurer panel, Carl Bauer, founding partner at Eos Venture Partners, advised insurers that to ensure a successful partnership they must not treat an insurtech as a guinea pig in the process, but rather be clear about what you’re trying to achieve and commit the proper resources.
“We’ve seen a lot of very interesting insurtechs overwhelmed and killed by large incumbents, simply because the insurtech clings on the edge of the balcony, trying to get it done but meetings get postponed and there are a thousand other priorities,” he said.
Bauer added that, for both the insurtech and the insurer, it’s crucial to get buy-in from as high as possible in organisations.
“If you become a semi-guinea pig in the subdivision level where nobody knows what you’re doing, you are seen as a diversion of resources and time. It’s probably pre-programmed death,” he said.
In agreement, Joan Cuscó, global head of transformation at Mapfre, said: “Partnering with insurtechs allows us to move as fast as they are, if we don’t try to strangle them but let them grow with us.
“We can explore at the pace of insurtechs; even if they are not profitable, we don’t care as we are exploring at a very low cost and a fast rate.”
A healthy balancing act
In terms of insurtech strategy, Eric Joost, chief technology and global markets officer at CAC Specialty, advised insurers to know what they’re looking for in an insurtech.
“It’s good behaviour in this wider space to help everybody out.”
Eric Joost, CAC Specialty
“If you’re an insurer, you shouldn’t limit your interactions. You should be widely talking to everybody, almost in a way that looks a little wasteful in terms of your time, because it’s good behaviour in this wider space to help everybody out and that’s where you can dig into what’s required to make this work,” he said.
Joost added that even insurers with a large R&D or investment budget will be limited by resources, money and time.
He said: “There’s maybe 20 things on your priority list and you can get to 10. The outside world can feed the other 10 easily. It’s a healthy balancing act.”
However, he warned, while an idea can be compelling and best in class, insurers need to be aware that “if it conflicts with everything else it’s going to interact with, you just can’t use it”.
The reasons insurers want to partner with insurtechs are pretty clear, but why do insurtechs want to partner with insurers?
“We are their natural clients, it’s not about just partnering to be nice,” said Cuscó. “Eighty to eighty-five percent of insurtechs are not going to become insurers or managing general agents, they’re going to be software companies that work with other insurance companies.
“On the other side, if they want to keep their focus they need to decide what they want to do and what they don’t. The problem with full carriers is we want to own the full value chain.
“Insurtechs are naturally a very thin slice of the value chain and they want to grow in this slice. It’s not until year four or five that they start extending their arms.”
“Make sure the ambition of both parties is clearly stated and there are no hidden agendas.”
Joan Cuscó, Mapfre
Perfect partners
Getting the balance right in a partnership between an insurer and an insurtech company can be tricky.
Success is never guaranteed but leadership, buy-in and a willingness to engage can help increase the odds.
Bauer said: “Innovation is not bringing new companies and new technology—innovation is a state of mind. It starts with infusing an appetite for risk taking inside a risk-averse industry. It’s a big cultural shift for many of these insurers.”
He explained that when teaching a large organisation to work with new ideas and new smaller entities, it has to be acceptable for things to fail.
“Out of 10 insurtechs, you’re lucky if one is going to work. It’s about not having a blame culture,” he added.
For Joost, the personal involvement of leadership is key to getting a partnership right, along with change management.
“We underestimate how much people change has to happen, not because we have good or bad people, but because we have a lot of the participants in this,” he added.
Cuscó concluded that honesty is key, noting that you have to “make sure the ambition of both parties is clearly stated and there are no hidden agendas”.
