Insurers fear new entrants disrupting the traditional value chain

The insurance sector’s current business model is threatened by new entrants targeting parts or the complete insurance value chain.

The impact of new entrants to the insurance sector was a key discussion point at the Intelligent InsurTech Europe conference in London, which took place on Wednesday November 16, with several delegates making this point in live interviews with Intelligent Insurer.

“We have already seen the likes of Google and Amazon in this space and I can see other technology companies looking to bundle insurance solutions with technology,” said Oliver Brew, executive vice president at Aspen Insurance.

“For a traditional insurance carrier that is a real challenge that we have to address as an industry and it’s incumbent on us to develop those technologies and embrace that change in order to provide a better service to our customers,” Brew noted.

Pressure on traditional insurers is not expected to decline any time soon.

“The disruption of technology will continue to accelerate and we’ll see non-traditional players joining the industry.” Brew said.

An example of new entrant on the technical side is a company called The Climate Corporation. The San Francisco-based firm examines weather, soil and field data to help farmers determine potential yield-limiting factors in their fields.

The company's proprietary Climate FieldView platform combines hyper-local weather monitoring, agronomic modelling, and high-resolution weather simulations to deliver Climate FieldView products, mobile SaaS solutions that help farmers improve profitability by making better informed operating and financing decisions, according to the firm’s website.

Among companies trying to disrupt the client relationship side of the insurance business is Bought By Many, a free, members-only service that offers help to find insurance for the “out of the ordinary things” such as pet or gadget insurance.

The platform understands itself as an alternative to comparison websites or directly contacting insurers and it negotiates discounts and cashback offers for its members. It claims to help its members save on average 18.6 percent on the insurance cost. If successful it may contribute to a disintermediation between insurers and its clients.

“There are very interesting business models coming from start-ups that want to change the way people buy insurance and that is done either online or via the smart phone and the frequency in which people buy insurance is changing completely,” said Yannis Korgialos, Munich Re’s partner development manager.

“One exciting innovation that we are seeing is insurance on demand which has come up for lots of different lines like home, motor, content. This is something people want to be able to insure when they want and how they want,” Korgialos said.

Market participants expect start-ups to continue challenging the business model of traditional insurers.

“Smart people in the insurance industry will start flocking to Silicon Valley and other centres of technology and venture capital and pitching ideas,” said Sarah Stephens, head of cyber technology and media at JLT Specialty.

Stephens expects large investments into start-ups to result in transformational innovations to disrupt the traditional insurance industry. “I don’t see the big innovations coming from today’s giants in the industry.”