More insurers will look to bypass company culture and barriers to innovation by creating their own insurtechs over the next two to three years, says Celent senior analyst Mike Fitzgerald
Insurers will seek to establish more “greenfield” insurtech companies over the next two to three years, according to Celent senior analyst Mike Fitzgerald. These are companies created by the insurer that are separate entities, they are not bound by existing culture or politics.
Fitzgerald gave the example of Sonnet in Canada and MetLife’s MyDirect in the US as companies that follow this model.
Insurers will choose to use this method, according to Celent senior analyst Mike Fitzgerald, because it will cut costs, drive efficiency and enable innovation.
“Innovation has been very difficult to do, particularly if it is disruptive innovation,” Fitzgerald told a global audience of delegates at Guidewire Connections 2017. “Sometimes it requires separation from the mothership, or the main company.”
A different way of thinking
Insurers doing this should be able to cut costs and launch products sooner, as they benefit from a different economic model.
Rather than thinking in the tens of millions, as executives for an insurer are likely to, by creating a new company they can reduce the spend needed to support a proposition.
While an insurer might take years to put together a new proposition, it could be take a matter of months for a young insurtech company operating outside traditional boundaries and systems.
A shift in risk
Fitzgerald said that for the model to work, insurers will need to shift focus away from financial risk and more towards reputational risk.
According to Fitzgerald, more insurers will need to ask: “We can spend the money, but how will we manage the reputation if this does not work in the marketplace? How will we manage our reputation if we have to go out and distribute these products or propositions in a different way?”