Historical insurers and Insurtechs: competition or cooperation?

Far from the sometimes somewhat outdated image that outside observers have of it, the insurance sector is also exposed to the winds of transformation. The few Assurtechs that have emerged in the media are only the tip of the iceberg. It is the entire sector, and in particular the historical players, which are engaged in a technological change which should accelerate in the years to come.

The first driver of change is quite logically the requirements of policyholders. To the traditional demands concerning prices, responsiveness and guarantees are now added new expectations linked to digitalization and the ecological transition. In 2022, a client does not only compare two insurances with each other: he evaluates his insurer against all his service providers. And his expectations will align with the highest bidder of the players in his daily life, like Nespresso, Orange, Amazon and Uber. The service must be up to par.

The formidable startup-investor alliance

The second spur comes from the formidable couple formed by startuppers and investors. Entrepreneurs are on the lookout for every opportunity to uberize the insurance sector. They are all the more stimulated as the sector is perceived as conservative. And the money is not lacking to finance them. Finance and insurance startups raised nearly 2.3 billion euros in 2021. Leocare, Shift Technology, Alan… Already a few new brands are setting up shop in the landscape.

However, the game is not played and the historical players clearly have assets to assert in the current digital revolution. To begin with, the sector has been highly concentrated in recent years, and insurers also have a financial strike force that allows them to carry out their transformation. They then have the ability to adapt to permanent regulatory changes and a rare complexity in insurance. Finally, they have customer knowledge that cannot be improvised. However, insurance remains a business of trust. The human relationship retains an important place. Transformation must know how to combine the best of technology and people.

The new dimension of the large group – start-up relationship

On the other hand, they do not necessarily have the capacity for unbridled innovation of startups. Thus, the challenge for the years to come for insurers is quite naturally sketched out, which is to seek out expertise where it is, that is to say from new players. This collaboration between a large group and an innovative start-up is not new, but it takes on another dimension with the emergence and development of open insurance and the so-called platformisation phenomenon. This approach should enable incumbent insurers to transform themselves in two dimensions.

The first is the necessary modernization of their infrastructures, to stick to the standards of tech companies: API, use of artificial intelligence for pricing, scoring (fraud, attrition, etc.) or automatic processing of acts, digitization of subscription for salespeople and distributors, acceleration of e-commerce, new customer interactions (voice bots, social networks, etc.).

This first change will make possible the second which consists of a greater openness to the outside, controlled and secure. It will make it possible to connect with ecosystems of innovative services to offer a more personalized and complete response, and to open up new distribution channels such as the proposal of insurance products within customer journeys in other areas: sale of goods, travel or services.

First path? Use Insurtechs as service providers. The second, more promising in the future, consists in financing them and adopting their solutions. Hence the appearance among historical players of in-house investment funds like ALM Innovation, which takes tickets in start-ups in the sector. The next step lies in the creation of common solutions, an effective way to change gears on digitalization by combining continuity and renewal.

Complementary to Insurtechs are the Services (Healthtech, Moneytech, RHtech, Regtech, etc.) which provide incumbent operators with services enabling them to reinvent the sometimes very financial value proposition of insurance by adding a “Care” approach. With Insurtechs, insurers are reinventing the value chain through pricing, management, distribution… with Service techs, they are extending this value chain by associating it with BtoC or BtoB services bricks with high digital intensity. The long-term objective: a platformized world of plug and play where the digital bricks of startups are articulated to increase the customer value of historical insurance players.

Isabelle Hébert, Director of Strategy, Digital, Marketing and Customer Relations AG2R LA MONDIALE

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