Start-ups are a catalyst for change but not the whole solution

Whilst start-ups in the insurance industry have been somewhat slower off the mark compared to other sectors, they are playing an increasingly influential role in the development of insurance. But how, when and whether to engage is the challenge for insurers; a recent survey suggests less than a third of established insurers are exploring partnerships and only 14% are investing in or supporting incubators(*).

There is increasing hype around insure-techs and most big insurers have announced the creation of innovation labs, acquiring start-ups, and providing finance through corporate venture capital funds. Whether these investments will provide the required return on investment remains to be seen. And as we often say in the world of insurance, you have to sell a lot of car insurance policies to finance this!

Ageas made the deliberate choice not to invest in random experimentation, in favour of the “internal incubator” model which is designed to identify opportunities for incremental innovation in areas of strength vs. completely out-of-the box solutions. Don’t forget that only a handful of the thousands of initiatives launched each year will survive. The rest may be intellectually interesting, but that doesn’t necessarily equate to added value.

There are many options to be explored, like entering selectively into commercial agreements with start-ups that possess a key skill in relation to the internet-of-things or which are focused on specific aspects of the value chain. And while there is a plethora of creative ideas and no shortage of seed funding available, the challenge for start-ups is to engage with enough customers and scale up, which is what insurers can offer them. Each insurer must consider its own position and ensure that its actions are consistent with its risk appetite and strategic profile.

To date most of the best innovations launched within Ageas have been “crafted in-house”, like e.g. in the UK, Belgium, Portugal, Turkey and across Asia. Give people freedom in terms of time and resources to develop innovative ideas outside the business as usual, and the results can be quite remarkable. In our experience the integration of such ideas into the value chain is also much easier than when ideas are sourced externally. This doesn’t mean that no inspiration can be found outside the company, on the contrary.

Start-ups are playing an important role in challenging the industry norms and thus acting as a catalyst for change. They are forcing new approaches to interact with customers and it would be foolish not to stay close to them. Ageas has itself made some limited investments in external incubators and venture capital funds focused on healthcare technology which is a space we also track autonomously. In some cases this leads to opportunities to engage in a very specific initiative for a defined period of time. These types of agreements exist across the Group, and they can be negotiated centrally or locally without bureaucracy, mirroring the entrepreneurial culture of start-ups.

So what of the future? Maybe one of the start-ups we see today will go on to be hugely successful – even disruptive. Some will be acquired and merged with other companies. Others will fall by the wayside.

The hype around start-up innovations should not overshadow the core traditional incremental innovation that takes place within insurers every day. Also in this type of innovation there is also place for successful collaboration with start-ups. There is room for all.

*source PwC Global FinTech Survey 2016