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The rocky road for corporate startups in a transforming insurance industry

Startups no longer pose a threat of disruption these days. Instead, they are welcomed as an opportunity and a solution for the digitalisation of insurers’ core processes. We talk about them as enablers. At the same time, the insurance industry is in a state of contentment despite the Covid-19 pandemic, as claims costs are low due to people working from home and less traffic and the digital challenges of lockdown and remote work have been handled rather well.

But the industry is on the move; it’s rumbling from within. Innovation efforts are becoming more small-scale and intricate. Securing the status quo is no longer enough. The sight of other industries beyond the horizon, such as e-commerce, and the success of platforms in Asia and the U.S. are exciting contemplation in insurers. It’s clear that German insurers will not become the next Facebook or Alibaba. But insurers do want to know what customers want and they want to be able to serve them in real time, which involves gaining cloud capability and participating in ecosystems and platforms. And they have plans in the works to do just that, if not on the part of leadership, then in many internal circuits of the innovation, IT and transformation departments and sometimes the specialist departments, too. As a result, countless innovative ideas are being developed that are rarely implemented. It’s not an idea problem that we have; it’s an implementation problem.

Insurers will soon overcome this implementation problem

not in 2021 or 2022 – but we are already seeing more innovative ideas being implemented. We’re seeing insurance platforms of various sizes coming forward. We’re seeing an increase in solutions that are no longer tailor-made for just one insurer but are instead designed to be multi-client capable. We’re seeing offshoots designed to neutralise offers from individual insurers. We’re seeing insurers establish new investment vehicles increasingly more. In a nutshell, we’re experiencing the beginning of digital networking in the insurance industry and seeing it become more and more agile. And this rouses the much-needed courage for the way ahead.

The developments mentioned are currently happening behind the scenes and go largely unobserved. In particular, the horizontal distribution of multi-client-capable solutions from insurer to insurer, which are technically implemented and supported by independent technology partners, remains rather unpopular. Why is this? Because insurers have to jump through hoops in order to use co-marketer’s (or even a competitor’s) technically procedural solutions for themselves. Up to now, it’s been easier for insurers to offer their own clever solution on the market in order to share development costs instead of buying the same solution themselves from a competitor. Or as stated in the title: offering is tough, purchasing is even tougher.

We believe in the following regarding development:

1. Pressure to implement innovative ideas will arise because employees develop expectations of their management to do so – at least some of the ideas.

2. Insurers will make solutions for internal processes increasingly multi-client capable and offer them to co-marketers either directly or via platforms.

3. Initially, SME insurers will forego in-house developments. Instead, they will choose to cooperate with other market players, as it allows for higher functionality at lower cost.

4. An age of active cooperation is beginning. Providers are outdoing each other in standardising their own processes by purchasing solutions from corporate startups without giving up provider-specific designs (such as parameter adjustments).

5. Consequently, offering solutions will always be connected with the openness to buy solutions because the marketplace is not one-sided.

It seems logical that not only startups will play an important role in this development; established tech companies will do so, as well. Organising this cooperation between different players on equal footing will be important.

Offering is tough, purchasing is tougher. The road to the digital transformation of the insurance industry is rocky. But we’re on the verge of a breakthrough. Corporate startups will be only one of the many manifestations of a newly digitalised insurance industry. Other manifestations will include new platforms, non-corporate startups and solutions created by tech players. However, corporate startups will also make a significant contribution to driving forward not only the technical transformation but also the change in cooperation, that is, the cultural transformation in insurance companies.

We at InsurLab Germany have one essential request: Get networked. Talk to each other. With the startups, the tech players, the researchers who have the know-how, the consultants and all the various service providers – and with the risk takers. You can find them all here at InsurLab Germany – at our events and workshops, in the working groups and in the garage. Digital transformation is only possible together and if everyone participates. That’s how you create #InnovateInsurance.

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Picture Stefan Schmid (Gastbeitrag InsurLab Germany)

Author Stefan Schmid (Gastbeitrag InsurLab Germany)

Stefan Schmid is Senior Corporate Manager at InsurLab Germany. As the largest InsurTech initiative in Germany, InsurLab Germany e.V. and its 87 members make collaboration the standard! InsurLab Germany builds bridges between startups and established insurers. Our goal is to work together to transform the German insurance industry through digitalisation and to redesign and further develop business models. Startups and scaleups receive exclusive access to top decision-makers in the insurance industry. InsurLab Germany’s digitalisation mission is supported by leading technology and service providers as well as universities.

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