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Investment in startups focused on developing technologies to transform the insurance industry doubled last year, compared with 2015, with artificial intelligence (AI) and internet of things (IoT) technologies major draws.
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As IT startups in the banking sector, known as fintechs, attract hundreds of millions of pounds investment, investors are increasingly turning their attention to insurance industry startups, known as insurtechs.
According to Accenture, over £15m was invested in insurtech in 2016, which was 50% higher than in 2015. In contrast, £936.5m was invested in UK fintech in 2016, although this had dropped by 15% compared with 2015.
In its The rise of insurtech report, Accenture said UK insurtech spending on IoT and AI, including automation, had increased by 79%. Globally, the report said insurtech investment totalled US$711m last year.
“We’ve seen a rapid acceleration of investment into and deal activity around intelligent automation and IoT startups over the past 12 months,” said Roy Jubraj, a co-author of the report and digital and innovation lead in Accenture’s UK Financial Services arm. “These technologies are primed to disrupt the industry in the years to come.”
In October 2016, Gartner said 64% of the world’s largest insurance companies had invested in insurtechs and predicted that 80% of life and property/casualty insurers would partner with these startups by the end of 2018.
But the analyst company warned that most insurance CIOs were not familiar with these companies or their value propositions. He said this needed to change and insurers should identify which of these startups could complement their offerings.
Read more about insurance industry IT
- Insurers are held back from digital transformation by legacy systems, but insurance-focused IT startups offer them hope.
- Insurance companies are investing in digital innovation, with a new breed of leaders formalising enterprise strategies.
- Insurance companies in Europe are under threat from companies outside their sector as they fail to keep up with digital developments.
Digital transformation is essential for insurers to prosper in the future. The warning signs of new competition have been around for quite some time.
In its Trends 2014: European digital insurance report, Forrester Research said companies in manufacturing, utilities and telecoms, as well as startups, could take business from traditional insurers.
Also in 2014, Accenture research showed that 67% of 6,000 consumers surveyed in 11 countries would consider buying insurance from companies other than insurers. Some 23% cited online service providers as options.
Meanwhile, in their bid to grow, insurtechs will face the same challenges as the fintech pioneers that came before them, according to Julian Skan, a senior managing director at Accenture Financial Services.
“The next challenge for insurtech startups is the same as what the more mature fintechs are now facing – being able to translate that investment into growth and customer acquisition,” he said.
Accenture has established a dedicated insurtech focus as part of its FinTech Innovation Lab in London. ........... ............. .............. .............