Most Insurers Will Partner With or Acquire Insurance Technology Startups to Secure Their Competitive Positions in the Next Two Years
Bangalore, India, October 24th , 2016 — Insurance sector CIOs need to expand their market insight concerning the innovation and disruption potential of insurance technology startups (insurtechs) to complement their digital insurance strategies, according to Gartner, Inc.
According to Gartner research, 64 percent of the world's 25 largest insurance companies have already invested directly or indirectly via their venture capital arms in insurtech startups.
Gartner predicts that 80 percent of life and property & casualty (P&C) insurers worldwide will partner with or acquire insurtechs to secure their competitive positions by the end of 2018.
Speaking at Gartner Symposium/ITxpo in Australia today, Juergen Weiss, managing vice president at Gartner, said insurtechs can stimulate or accelerate innovation among incumbent industry players and complement existing digital insurance strategies.
"Gartner has seen a growing interest among insurance business and IT leaders in collaborating with insurtechs or making them part of their overall innovation policies, but the research has also found that most insurance CIOs are not familiar with these companies or their value propositions," said Mr. Weiss. “We advise CIOs to identify areas where insurtechs could complement their digital insurance strategies, and evaluate potential collaboration or investments."
Gartner defines insurtechs as technology companies (1) that are in their early stages of operation; (2) that drive specific innovation across the insurance value chain by leveraging new technologies, user interfaces, business processes or business models; and (3) that leverage different forms of funding, including, but not limited to, venture capital.
The number of technology startups in the insurance industry has more than doubled globally during the last three years, according to Gartner analysis of the sector conducted in the second quarter of 2016. Digital customer engagement, mobile insurance management and analytics are the most common technology focus areas of insurtechs.
Sixty percent of insurtechs have been founded within the last three years, and two-thirds of them have their headquarters in the U.S. EMEA is the second-most important region for insurtechs, with 27 percent having their headquarters there, mainly in Germany and the U.K. In Asia, countries such as Singapore and China (mainly Hong Kong and Shanghai) have begun to promote the development of a local insurtech ecosystem.
Digitalization is one of the top priorities for insurance CIOs, according to Gartner surveys. However, the vast majority of insurance CIOs are still struggling to progress their digital strategies.
Gartner's research indicates that only 12 percent of insurance business and IT leaders consider their organizations to be digitally progressive, while the majority believe that their organizations are digital beginners or intermediate, at best. Reasons for this include a lack of agility caused by legacy IT systems, flat IT budgets and a lack of the right skills or the delivery models to support innovative business models.
"Collaborating with insurtechs, or at least evaluating them, could therefore provide a number of potential benefits for insurers," said Mr. Weiss.
According to Gartner, insurers have six main options to capitalize on the opportunities that insurtechs provide:
1. Partner (for example, Axa partnering with BlaBlaCar for carsharing).
2. Acquire, that is, purchase the intellectual assets and hire all resources of an insurtech.
3. Purchase (like one would buy technology from an incumbent vendor such as SAP).
4. Invest (obtain a minority or majority share, either directly or indirectly, via a VC arm, such as Allianz's investment in Simplesurance).
5. Incubate (for example, let insurtechs compete to get into a startup accelerator; mentor them; and give them a space to work and exchange ideas).
6. Insure the operations or assets of insurtechs.
Insurance CIOs who are planning to partner with insurtechs also need to be aware of the risks.
"Not all of them will survive," said Mr. Weiss. "Insurance CIOs will need to develop a fail-fast approach and an exit plan that secures intellectual property and critical resources."
Gartner clients can learn more in the report "Innovation Insight for Technology Startups in the Insurance Industry".
About Gartner Symposium/ITxpo
Gartner Symposium/ITxpo is the world's most important gathering of CIOs and senior IT leaders, uniting a global community of CIOs with the tools and strategies to help them lead the next generation of IT and achieve business outcomes. More than 23,000 CIOs, senior business and IT leaders worldwide will gather for the insights they need to ensure that their IT initiatives are key contributors to, and drivers of, their enterprise's success.
Video replays of keynotes and sessions are available on Gartner Events on Demand. Follow news, photos and video coming from Gartner Symposium/ITxpo on Smarter With Gartner, on Twitter using #GartnerSYM, Facebook and LinkedIn.
Upcoming dates and locations for Gartner Symposium/ITxpo include:
November 6-10, Barcelona, Spain
November 15-18, Goa, India
February 28-March 2, Dubai, UAE
Gartner, Inc. (NYSE: IT) is the world's leading information technology research and advisory company. The company delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Gartner is the valuable partner to clients in approximately 10,000 distinct enterprises worldwide. Through the resources of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, USA, and has 8,300 associates, including more than 1,800 research analysts and consultants, and clients in more than 90 countries. For more information, visit www.gartner.com.