It is impossible to predict the future and assess where InsurTechs and insurers will be in the coming years. However, insurers will continue to invest in technology as they try to adapt to the new focus on customer experience, according to Sentiance’s Ali Nawab in a new podcast.
In the latest Insurtech Story Podcast, Surya Saha and Alexander Schell speak to Sentiance chief product officer Ali Nawab on whether InsurTech will really disrupt the insurance industry.
By looking at the amount of capital being invested into the InsurTech sector, it is clear to see the rising interest in these technology companies. InsurTech companies have raised a combined total of $22bn since 2017, FinTech Global’s data shows. In 2020 alone, a total of $7bn was invested globally across 325 deals. The first quarter of 2021, which witnessed $2.3bn invested through 126 deals, indicates a similar level of capital, if not more, could be deployed to the sector this year.
With such an appetite for InsurTech, Saha asked Nawab the question of how InsurTech will disrupt insurance and whether it is the game changer or if it won’t succeed without the support of incumbents.
Nawab stated there are a couple of ways to look at the future but it will always be difficult to predict the future. He said, “We’re all going to be relatively wrong about what things will look like in a year or two from now. But what we’re going to be really wrong about is what things will look like five to ten years from now.”
That being said, it is easy to make some kinds of predictions. For example, the amount of money large insurers are spending on IT has been doubling each year for the past five years and this will only continue, Nawab explained. The reason for this is because insurers have not been prepared for the industry shift. Previously they were essentially focused on not losing money. “Customer experience, no one cared about it and rightly so.”
Nawab gave an example of a traditional insurer that has been in the market for hundreds of years. As they have been in the industry so long innovation is the last thing they have to do, their main goal is to protect value, he explained. This means having enough money to survive if it ‘blows ‘up’.
When questioned by Sentiance, these companies are not really engaging with customers. It is more of a once in a generation activity, when a child becomes older and involved with the policy, he said.
However, large insurers are trying to change this and speak to customers at least once a year, but that is tough, with customers even saying “why are you getting in touch with me? What is wrong?”
There is a lot of space for disruptors to come in and change the operations of large insurers. However, they are not going to want to change everything. There are some exciting developments, but not masses of change. Nawab said, “It is not something that is making them say anything beyond ‘okay let’s get a small innovation team in place and just look at what’s happening, but we don’t need to drastically change our business in any way.”
Nawab added that a lot of talk within InsurTech blogs gives the impression the whole insurance space has upended itself and InsurTechs are taking the world by storm. While there is some truth to this, it is not exactly the case, he said.
There are still many big insurers that have “tech debt”, which are legacy systems they spent a lot of money on upgrading to meet their needs. They are solving this by investing in technology to bring them in line with where they should be, but not competitively ahead of the market. The way around this is through offshoot companies funded by them and targeted in a small area, like an individual US state friendly to new startups, and built from there.
Listen to the full podcast episode here.
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