In our last blog post, we reported on the booming insurtech scene, which wants to redefine the traditional insurance business through digital transformation. But established providers aren’t just standing idly by. From Allianz to Zurich, nearly all industry giants have launched their own accelerator programs in order to join in on the fast-growing insurtech market. Below, we provide an overview of the most interesting developments.
Given the current hype, it’s easy to get the impression that the insurtech boom is primarily the business of young startups. But a closer look quickly reveals that this is by no means the case! Allianz CEO Oliver Bäte, for example, recently attended a capital markets conference where he confidently presented the group’s new strategy. Digitalization is at the heart of Allianz’s future development – and that more than ever before. While the groundwork for digital transformation is currently being laid, says Bäte, he expects to report tangible results as early as next year. The focus is on rapid development.
The Key to Insurtech Success Is Data, and Insurers Have Lots of It
So what’s the big rush? For about half a decade, the insurance sector has been virtually overrun by digitalization. The business model of the entire industry has remained more or less the same for decades, leading to a certain complacency among many insurers. When small startups dared to enter the market with new digital approaches, they were greeted with a mixture of arrogance and ignorance by many of the industry leaders until quite recently. But times have changed: Surprisingly, Allianz CEO Bäte announced in December that Allianz would invest 430 million euros in the insurtech market. Specifically, this will be done through a recently launched startup accelerator called Allianz X.
Bäte believes that a company the size of Allianz has an advantage otherwise held only by Silicon Valley giants: data. According to Bäte, this means that the company isn’t at a disadvantage compared to companies such as Google, Facebook & Co. The data just hasn’t been used until now. Allianz X is supposed to change this and pave the way to enter the digital age. While the reasons for this are complex, two obvious challenges can’t be overlooked.
People Who Don't Own a Car or House Don't Need Traditional Insurance
On the one hand, access to customers will radically change. It’s about a democratization of the market, which was long dominated by a handful of industry giants. Apart from the oil industry, there’s hardly an industry in the world whose market power is as concentrated as that of the insurance industry. Insurtech startups have successfully challenged the market position of large insurers – through data, digital services and dedicated customer focus. Now it’s time for the established players to respond and show that they’re also in the know about what insurance customers want. And this most likely doesn’t coincide with what the iconic insurance agent with his briefcase in hand has been selling for many decades.
Even more interesting, however, is the change in demand. While car and home insurance were classic staples of the baby boomer generation, a fundamental change in safety needs can be observed no later than the Millennial generation. The megatrend is called “usership instead of ownership” and already makes it clear today that, within a few years, only a small number of customers will need car insurance because self-driving cars will be owned by companies like Google or Uber rather than private individuals. So what can replace the traditional staples of the insurance world if cars, houses and similar goods fall by the wayside?
20 Billion Networked Devices – the Insurance Market of the Future?
Once again, the challenge and the answer both lie with digitalization. The growing dependency on electronic devices such as smartphones and wearables as well as the constant, partly unconscious use of digital services have altered the risk profile of the average insurance customer. Today and in the future, the primary objective is no longer to insure property against loss, but to insure against the risk of losing digital connectivity. If a smartphone fails or data is lost, customers face different problems than in the case of car theft. It’s about protecting customers’ digital identity and safeguarding their access to the digital world.
This in turn explains why simple insurance models such as smartphone accident protection have been experiencing consistent growth for years. A volume of nearly 50 billion dollars is expected to reach this market segment alone given a global smartphone population of 6 billion devices. If we add the 14 billion additional consumer IoT devices, we start to get an idea of what the future playing field of established insurance companies might look like.
Summary: With accelerator programs, Allianz and other large insurers are entering the insurtech market on a grand scale. At the same time, increasing connectivity and the exploding number of electronic devices such as smartphones and consumer IoT devices are changing the risk profile of insurance customers. B2X offers a turnkey solution for insurance providers who want to enter the market for consumer electronics protection. Contact us today and don’t forget to follow B2X on LinkedIn!
Robert Aderan is the Head of InsurTech Practice at B2X.