Fintech, the meeting of the finance and digital worlds is seemingly unstoppable. The rise of the Fintech industry is testament to the ever increasing interconnected global world we operate in and is implicitly linked to the social and economic trends in the global economy.
So what is happening in the commercial insurance industry?
There is no doubt that the adoption of innovative technology in insurance has been painfully slow. Our research shows that very few young people in the London Market use social media in relation to their work and young talent seems to undergo a ‘technology lobotomy’ when it enters the industry. Institutions are often still struggling to make their legacy systems deliver let alone embrace tech innovation.
But businesses feeling comfortable in their new shiny offices should look outward because change is happening and could be on the doorstep before too long. Companies like Trov and Hey Brolly have recognised gaps in the market, targeting the younger insurance-buyer and empowering them through apps. Trov positions itself as the world's first on-demand insurance service allowing customers to protect their valuables from their phone. Similarly, Hey Brolly positions itself as an insurance ‘concierge app’ advising customers on whether they are over or under-insured, helping them to get a better deal. Of course many of these start-ups will fail but history has shown that they pave the way for successful disruptors.
In the more traditional segment large insurers have recognised the threat and opportunity. Axa, for example has recently launched Kamet, a €100m accelerator programme aimed at insurance tech entrepreneurs. Aviva is also nurturing close ties with the FinTech community, hosting hackathons and a ‘Start-Up Weekend’ to encourage networking and collaboration between Aviva staff and start-ups. Additionally, Lloyd’s is actively involved with fostering an environment of innovation starting with its Innovation Awards late last year.
The insurance institutions have capital and inertia on their side but they are also under pressure on margins and strategies for growth are limited. So it seems that embracing innovation generally, and Fintech specifically, provides a potential way out. But to engage we need to understand and while lots of insurers use the word innovation in their marketing bumph the hard questions are around whether these established businesses with highly traditional ways of working can change quickly enough and if not should they start to make alliances with start-ups and the disruptors?
Gracechurch recently worked with Lloyd’s on their Innovation Awards and it was gratifying to see Beazley, Brit Global Specialty and Tokio Marine Kiln winning awards: it was particularly interesting to see that these initiatives had emerged from in-house funded innovation functions. There is a long way to go but the signs are that change might, just might be happening.
Do you agree? We’d like to hear what you think.