How The Insurance Sector Is Embracing FinTech Disruption

Insurance companies aren’t half as worried about FinTech start-ups as analysts might think; if insurers can’t beat them, they will join them.

Insurance companies are financial service behemoths, the proverbial tankers that take an age change course. That’s precisely why some see ambitious FinTech start-ups as such a threat; nimble, digital native brands unburdened by legacy systems, cultures and product lines.

Rather than focus on the challenges, here are some examples of insurance companies grabbing the FinTech bit between their teeth.

4 ways insurers are minimizing FinTech disruptor risk:

• Collaborating with FinTech start-ups
• Partnering with large technology companies
• Partnering in new, diverse commercial sectors
• Creating their own innovation labs

Collaborating with FinTech start-ups

Aviva is actively fostering closer ties with the FinTech community, hosting hackathons and a Start-Up Weekend to encourage networking and collaboration between Aviva staff and start-ups. Aviva even hosts a regular London meet-up group; InsuranceTech.

Through Aviva Innovation, the company gains access to would-be disruptive ideas and technologies, while the FinTech newbies have an opportunirty to test-drive their concepts in a fast-paced, creative but commercial environment.

Partnering with large technology companies

AXA Group partnered with Google’s Niantic Labs division, which creates mobile apps that connect people with the real world, to introduce the insurance brand into interactive mobile game Ingress. In announcing this partnership in December 2014, Frédéric Tardy, chief marketing and distribution officer of AXA Group, said:

“Aligning our brand with the unique interactive experience in Ingress represents a step forward in the digitalisation of our Group and a new way for our clients to discover our brand and our agencies.”

In Germany, the multinational financial services company Allianz and the telecommunications company Deutsche Telekom partnered to collaboratively produce “connected life”, products using mobile, “smart” (sensor-embedded and data-driven) and Internet-connected devices, for both retail and commercial clients. Announcing the partnership, Telekom board member Reinhard Clemens said:

“Cutting-edge digital business areas such as connected insurance services can only be tapped into if we use the expertise of both partners. Together, we can develop service-oriented, secure offerings that neither partner could implement on their own.”

Partnering in new, diverse commercial sectors

The Internet of Things (IoT) – ‘smart’, Internet-connected devices – have the potential to transform property and object-based insurance, while ‘wearable technology, such as ‘smart’ watches, glasses, jewellery or clothing that personalise in real-time to the wearer, could transform the way in which people (and pets) are insured.

Such areas are not the preserve of large technology companies, and are increasingly prompting unlikely partnerships between business sectors that would previously had no cause to collaborate.

For example, connected ‘smart’ thermostats from Nest automatically notify the user of cheaper energy suppliers during installation, in effect turning a home object into a price aggregator with “push”-notification ability. This presents opportunities for the future of insurance aggregators and highlights the changing face of potential insurance partners.

Creating own-brand innovation labs

There are multiple approaches to the innovation ‘lab’ concept.

1. Insurance innovation labs can be permanent divisions: The US insurer Allstate built its 2,000-sq ft Innovation Lab in 2006 filled with whiteboards, books, games and the latest technology gadgets and software “to engage employees in innovation”.
2. Insurance innovation labs can be time-bound projects: Another US insurer, Great American Insurance Company, takes one person from six of its departments to focus on solving a particular business problem using data and technology during a six-week innovation lab.
3. Insurers can embrace Open Innovation: Allianz has partnered with the UK’s Big Innovation Centre, contributing to its opensource projects and participating in cross-sector knowledge-sharing.

Finding insurers’ entrepreneurial spirit

Insurers, like any large incumbent sector, must evolve and embrace the digital ‘new normal’, which affects every facet of their business, both internally and externally. This includes embracing social media and social technologies, cloud-based IT infrastructures, mobile, as well as real-time digital and data analytics.

The idea that insurance companies simply lack an entrepreneurial spirit because they are risk-averse is just crazy. Insurance is all about risk analysis and providing a solution framework based on that. Also, insurance companies were analysing ‘Big Data’ long before the term was coined, and have access to more data than they can shake a stick at, so they’re not newbies on this front either.

Those that fail to evolve in the digital ‘new normal’ become obsolete, those that succeed – and who experiment to take first-mover advantage – will reap the rewards.

Please do share your thoughts and ideas in the comments section – I love to hear from you!

Elements of this article are taken from a report I authored – Digital Adoption in the Insurance Sector: From Ambition to Reality? – which was produced by the Economist Intelligence Unit for HSBC.

Anna Lawlor is a journalist, content creator and director of Social i Media. Get in touch via www.Social-i-Media.co.uk or on Twitter: @Little_Lawlor