Before everything went to heck, many life insurance organizations had big plans for buying insurance technology startups, and, in some cases, nurturing new insurtech startups.
Samantha Chow, a senior analyst at the Aite Group, talks about life insurers’ shopping plans in a summary of results from survey of 22 life insurance organizations that was conducted in mid-2019.
- A copy of the Aite report is available, behind a paywall, here.
- An article about an Aite analyst’s thoughts about wealth management trends is available here.
Eighteen of the organizations in the sample are life insurers. One was a life insurance agency, one was a broker, and two fit in other categories.
About 95% of the participants describing creating efficiencies, and making it easier to increase and decrease capacity, as needed as a very important or important goal for modernizing digital systems, and 86% ranked improving customer experience as a very important or important goal.
But only 55% of the survey participants said their organizations were spending a lot, or a good amount, on improving technology related to the customer experience, and just 41% said their organizations were spending a lot, or a good amount, on technology that could improve efficiency and scalability.
Chow also looked at how life insurance organizations’ tech dreams translate into opportunities for insurtech companies.
Eight of the 22 organizations she included said they were already investing in insurtech startups through established venture capital funds, and two more said they hoped to start doing that, either in 2020 or in a later year.
Four of the organizations had bought, or were buying, insurtech startups, and six were hoping to buy startups in the coming year.
Four of the organizations had already started investing in “seed-stage” insurtech startups. One was hoping to invest in seed-stage startups in 2020, and three were hoping to invest in seed-stage startups after 2020.
The severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), the virus that causes COVID-19 pneumonia, has already disrupted life insurance organizations’ operations gravely, by pushing life organizations to have as many employees as possible working at home.
The pandemic has also forced executives and managers at all levels to focus attention on efforts coping with the COVID-19 crisis and turmoil in the investment markets, and it has raised the possibility that some life organizations could see a surge in claims.
But the crisis could end up helping some of the kinds of insurtech efforts Chow describes, or having a neutral effect on others,
1. Most skilled insurtech developers are comfortable with working from home. The developers are the ones who help all of the other people in the life insurance community figure how to use Skype and Zoom.
2. The costs of many insurtech projects are small relative to life insurers’ overall administrative budgets. Big life organizations are unlikely to get much help with paying an avalanche of life insurance claims by eliminating small insurtech projects. They may look elsewhere for cost savings.
3. Life insurers may need new forms of technology to do business in a new environment. Life organizations now face intense pressure to replace face-to-face encounters of all kinds with online communications. They may also need new systems to handle large fluctuations in claim volume, shifts to new types of products, and new government requirements.
At least in the short-term, one barrier to insurtech efforts could be difficulties with buying basic tech tools, such as the kinds of headphones and microphones that might be ideal for videoconferencing system, because of the worldwide rush to working at home, and because of COVID-19-related supply chain disruptions.
— Read Insurance Companies Are Essential: States, on ThinkAdvisor.