Insurtechs: Bigger Fish or Red Herrings?

At this point, insurtechs have been around long enough that most of us are familiar with the benefits they typically tout. Here are the Top 10:

1. Innovation and modernization, based on their belief that new technologies like AI, machine learning, blockchain, and IoT will change the game. Core system vendors are under pressure to integrate these technologies into their offerings to remain competitive.
2. Legacy system transformation, based on their belief that they know the industry well enough to introduce more flexibility, scalability, and the capability to handle modern insurance demands.
3. Enhanced user experiences, based on their belief that they’ll equip core system vendors to enhance their systems with user-friendly interfaces and customer-centric features to meet the expectations of modern consumers.
4. Data-driven personalization, based on their belief that data analytics is the silver bullet for ensuring personalized insurance products, claims handling,  and customer service.
5. Faster implementations, based on their belief that, for the most part, one size will fit all.
6. APIs and integration capabilities, based on their apparent belief that core system vendors aren’t already including such things to make their systems more open and adaptable to new technologies and partners.
7. Ecosystem development, based on their apparent belief that core system vendors will be open to partnering with all of them, their value to vendors, their customers, and their customers’ policyholders notwithstanding.
8. Co-development and white-labeling, based on their apparent belief that core system vendors may not be developers in the first place and that they may be willing to compromise their brand credibillty by suggesting they can’t developing capabilities on their own.
9. Increased competition, based on their apparent belief that they can influence and compete with traditional vendors.
10. Continuous evolution, based on their apparent belief that the rest of the world, the insurance industry, and technology might remain static without them.

But there’s a bigger reality to take into consideration.

Behind the Veil

Given the fact that some insurtechs have, indeed, proven their value and manifested varying degrees of longevity, we’re not entitled to express opinions about the Top 10. But we should bear this in mind: In May of last year (the most recent data we could find on the topic), Boston Consulting Group reported the following in an article entitled, “Insurtech’s Hot Streak Has Ended. What’s Next?”:

Investments in the fintech sector decreased by 43% year over year, with insurtech registering the largest drop at 50%. After hitting a peak of $4.9 billion in the second quarter of 2021, insurtech funding began its descent. By the fourth quarter of 2022, funding had reached its lowest level of the past 20 quarters, with only $800 million invested. That marked a decrease of 64% from the previous quarter and 78% from the fourth quarter of 2021 … the pace of growth has slowed significantly, and the market shows no signs of a rebound.

Does that mean insurtechs are going away? Nope. Does it mean we can or should ignore them? Nope. Does it mean core system vendors should be prepared to incorporate and integrate the ones that suit their business models and provide discernible value to their customers? Yep.

That’s exactly what we mean when we say the Finys Suite is future-proof.