Industry innovation is benefitting traditional insurance companies

Published: June 26, 2019

Updated: June 30, 2019

Author: Luke Jones

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Technology innovation in the insurance industry is moving at a rapid pace despite the industry not typically being associated with tech advancements. We already know investment into insurtech companies surged during Q1 of 2019, but there is more happening in the industry.

Sophia Yen, insurance strategy and innovation leader for EY, told Insurance Business that innovation is rife in insurance, despite the industry in Canada being over 150 years old. She says over recent years innovation has started to increase rapidly.

“I think there’s a lot that is happening in the industry that’s causing the drive for innovation, largely our continued softening market as well as everyone’s pursuit and drive for profitable growth.”

One of the key drivers of innovation in industry has been customer demand, with consumers increasingly expecting solutions leveraged by technology.

“Once upon a time, you ran a company and you produced a widget, say a bottle of water, and you produced the best bottle of water,” said Yen. “What we’re seeing is that the most successful and profitable companies today actually sit on massive ecosystems, and they know and learn the needs and interests of their customers and clients, and then create products and services around that. We think about Amazon, who started by selling books, and now, they just launched retail clothing.”

Yen points to the ongoing transformation in the insurtech market, which is a beneficial change for traditional insurance companies. “We’ve seen the pendulum swing from a total disaggregation that was the birth of all the insurtechs. If you look at some of the more successful insurtechs, they’ve taken out a piece of the vertical of the insurance value chain, and they’ve specifically made that component easy to do business with, or heightened that customer experience, but that left us with a very fragmented ecosystem.”

Traditional insurance companies are now paying attention to insurtech companies, either aware of their success as competitors or because they are becoming viable partner candidates. Insurtech growth has coincided with a surge in merger and acquisition activity.

“We’re starting to see aggregation and we’re starting to see heightened M&A activity across the board, and part of that is fueled by the capital surpluses that most of our companies are enjoying right now, and needing to put that surplus to work.”