This time around, we explore the collaborative relationship between traditional insurers and Insuretechs in a Q&A with MD of Compass Insure, Paul Carragher. As an insurer that has played in the InsureTech space for a few years now, we wondered what his view was of the recent CapGemini article (referenced below) which highlights collaboration between existing insurers and insuretechs as a foundation for the next generation of insurance models.
Sitting down with Paul, it strikes me immediately that he doesn't wear a wrist watch. Has working in the Insuretech space changed his perspective – even on that age-old executive hallmark – the signature timepiece?
Yeah! I'll have to think about that (he laughs). I've never needed a watch to be on time. Even with the variances we deal with – I try to stay focused on the rhythm of the day and am seldom late.
One benefit is that I'm not as driven by the minutes ticking by. The demand of the moment also gets my full attention. It's just a personal preference really.
But, yes, with the tech and connectivity available – a traditional wristwatch isn't essential to keep time. So, in that respect – I do feel I keep my edge. But a beautiful timepiece doesn't pass my attention - just for its detail and craftsmanship. This is something I prize.
Hmmm, an analogy in there for collaboration between Insurers and Insuretechs? So, why did you venture into the Insuretech space as Compass Insure?
Well, it's a natural space for us. Our specialist underwriting agency model lends itself to collaboration and partnership with people who have an entrepreneurial mind-set. Using our current eco-system extended this approach into the tech space. Working with savvy partners to help shape the digital evolution of insurance seemed natural.
I understand that your ventures have included seed funding, incubating and/or partnering to bring four Insuretechs to market. This must have meant some interesting experience in collaboration?
Yes! (He smiles). Most Insuretech founders are not just entrepreneurial but, by definition, they have a mind-set of disruption. Digital ninjas in many ways – they move quickly and are designed for maximum impact. Yet, insurance is a simple business on paper and a complex business in execution. This complexity is deceptive – you can't see it when looking in from the outside. So it's a constant balancing act between protecting the integrity of the business and meeting that ninja-like drive for change and innovation, which is at the core of our Insuretechs. It's made for some robust meetings over the last few years.
I would love to hear about those. But before we go there, where have insuretechs impacted you as the primary insurer?
For us, as a specialist insurer, it's certainly opened new markets. New ways of doing business. It has also created engagements and access to sectors that we didn't previously interact with. But importantly, it has shifted the way in which we think about our traditional business vs new opportunities. We've collaborated with retailers, other digital-first companies, share trading platforms – all of whom operate using varied business models. This convergence with sectors outside of the insurance space has made for a learning-rich experience.
The last few years working with these young, start-up companies has certainly fuelled agile thinking. More emphasis on value-creation, speed and flexibility. One aspect of agile thinking, which is really under-discussed in insurance, is the value of curiosity and constant learning. Being curious about how things can be done differently and staying flexible has been critical.
Can you give us an example?
Yes, for example: one of our current Insuretechs is set-up as a broker because that's the best vehicle to reach their market. Another one follows the UMA model more closely but partners with other digital platforms to provide an add-on insurance product to people trading shares. This means we are able to deliver a bespoke range of tailor-made, individualised vehicles best-suited to the needs of that product or partner.
We've also, for example, developed simplified policy wording – primarily for customer accessibility but also to suit the digital communications platform and it has worked well.
There's an impetus towards a digital culture. We also understand the mind-set of the millennial customer better. We think differently – although the legacy processes have not all caught up. This is also because the adoption of new digital processes is governed by a natural push-pull from the market. But it is filtering through – not only to us as the primary insurer – but to our current eco-system of underwriting agencies and brokers.
We believe – through lived experience – in the possibility of leveraging technology in creating game-changing products.
Right! So what have been the challenges?
Well, here's the un-trending reality. Machine learning, artificial intelligence and other digital mechanisms are evolving - they are not off-the-shelf, ready-to-go and insuretech entrepreneurs would be sensible to embrace the iterative process of tech and plan for this in their business strategy. Delays in IT development, glitches and even an over-estimation of AI to do the job is a high cost - when underestimated in the planning. Don't be disillusioned but don't be seduced by the hype. This would make business sense.
So, in addition to understanding that AI may not deliver a ‘silver bullet' what is your advice to InsureTech entrepreneurs and perhaps, insurers- having worked so closely in this space?
This will get a few laughs! But I think that for Insuretechs to really get an edge over traditional insurers and competing tech companies, they need to get under the skin of the business of mainstream insurance. I understand why Insuretech entrepreneurs feel that it will blunt their innovative edge, or maybe even, that they'll be tainted with the ‘classic timepiece' mind set.
But actually, it makes the Insuretech model more robust. So understanding the operating levers like capital requirements, margin requirements, target loss ratios and the underpinning fundamentals - will speed up the returns delivered by born-digital models.
The investment in a deeper understanding of primary drivers will not only make for a great customer experience but will improve the long-term sustainability of the value chain.
Likewise, as insurers working with insuretechs, it is important to commit to the long-haul. The learnings from insuretechs are the gateway to insurance re-inventing itself – whether through evolution or revolution.
If we really get the value of integrating the fundamentals of the insurance business with both the advantages and limitations of digital-first models of insuretechs - designed for accessibility, intelligent interface, transparency and cost-effectiveness – insurance will evolve exponentially. We will get something disruptive and robust. That's the sweet spot.
So, yes leveraging each other's strengths - which requires maturity and insight from both sides is the underpinning of the next level of collaboration. So far, as an industry, this has been a foray and now the real partnerships must evolve and grow.
What next for Compass Insure?
Our commitment is to explore partnerships that leverage technology to benefit people. And of course, there is a still an economic element to it - return of capital & profitability. But the primary driver is how to positively impact our space.
What advise would you give your younger self?
Dream bigger and take more risks. (chuckles)
In the next article, we will look at what CapGemini refers to as Industry Re-configuration and Business Model Innovation including: the impact of a digital culture and agility on the way in which underwriting agencies and brokers operate, the impact (or not) on commercial insurance lines and the customer readiness for a digital-first culture.
For the previous article in this series, click here: http://www.compass.co.za/2019/02/strong-eco-system-and-value-chain-differentiation-a-model-for-future-insurers.html
For the full original article by CapGemini, click here: https://www.capgemini.com/2019/02/what-characteristics-will-successful-insurers-share-in-the-future/
MD of Compass Insure