There were 120 private technology investments made by reinsurers over the course of 2017 – the highest number recorded for any year to date.
A new report from Willis Towers Watson Securities reveals that incumbents increased their level of influence over the start-up community last year with a 36% rise in InsurTech funding.
A total of $2.3bn (£1.6bn) was invested in 2017 – the second highest amount ever – compared with $1.7bn the previous year, as firms looked to a broad range of technologies with potential applications to their core business.
“Incumbents sent a clear message to potential disruptive outsiders,” Willis Towers Watson Securities CEO, Rafal Walkiewicz, said.
“By investing heavily in start-ups and technology, reinsurance companies appear to have assumed a semblance of control over the InsurTech revolution.”
The report shows that 65% of incumbent InsurTech investments to date have been focused on enabling the value chain, with firms attempting to enhance efficiency of product delivery, underwriting, claims and other admin functions.
This is thought to reflect the findings of a survey of 600 reinsurance and investment professionals that show 75% believe their company is “moderately” to “extremely” at risk from disruption.
Despite this, 72% of innovation resources are devoted to incremental technologies, rather than radical ones, with half the respondents saying their firms are not fast movers in relation to innovation.
It was also found that only 20-30% recognise and prioritise substantial inventive contributions from external talent pools, such as accelerators/incubators and venture capital.
Walkiewicz warned that less than 10% of InsurTech investments to date have flowed into start-ups targeting full-scale value chain disruption, and that focusing on incremental technologies could leave firms unprepared.
“It is possible that incumbents’ collective response to InsurTech hype has diminished their ability to recognise true disruption,” he continued.
“High barriers to entry associated with regulation, product complexity and the value of long-term customer relationships may shield incumbents from large-scale disruption.
“But external capital entering the industry is searching for potential unicorns, funding disruptive ideas and breakthrough technologies that may seem crazy at first.”
InsurTech is expected to help generate over $400bn (£312bn) worth of premiums worldwide by 2023, more than double the estimated $187bn today.
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