We publish yet another follow up on a series of blogs on the insureTech value chain and its implications for investors. This blog links a couple of comments in the aftermath of the NS Insurance article, and offers some ideas going forward.

A blog article that I wrote some time ago got the attention of Peter Littlejohns who put together an article for NS Insurance, following extensive interviews in the industry with input from inter alia Alexander Cherry, Nigel Walsh and Rob Galbraith. Essentially the article talked to the difficulty of achieving returns on technology and market development whilst paying out underwriting fees to insurance carriers. Another point made was that InsureTechs can achieve control of products and speed to market better than traditional carriers, or even underwritten products (by InsureTechs), whose underwriting partners are typically slow to sign off on the smallest of changes – another case that I can point to in a current client.

Nigel pointed out that InsureTechs such as Wrisk are bridging the gap between two markets, automotive and insurance, thereby leveraging balance sheet. He states that some InsureTechs are “not waiting for you [the carrier] anymore, we think we can get to the market ourselves, so we’re going to seek capacity and become an underwriter”. Brilliant!

What is exciting is further evidence of this trend since the article; Getsafe announcing recently that it has applied for its own insurance carrier license, underlying the long term nature of its business.

Alexander Cherry states in the article that Insuretech’s are looking to a reinsurance model and starting to take slices of risk, gradually building up the skills and capacity themselves as track record develops, making inroads into the market directly. Of course there is also the chance that carriers find ways of becoming more nimble; less tied to optimising the use of existing legacy systems and more focused on their market – what wouldn’t an Insuretech give to start with a contact list of a million segmented customers who are known in terms of needs and spend?

In this context, we are very excited by a relative newcomer to the Insuretech scene, AkinovA, run by CEO Henri Winand. AkinovA for those unfamiliar, is an electronic marketplace for the transfer and trading of insurance risk. Henri told me recently that MGAs are coming to AkinovA, which offers a different way of working with their existing paper and other sources to underwrite – without the need for permanent capital.

All in all, this competition is focused on the customer, as pointed out by Tony Grosso in the NS Insurance article. If insurance carriers allow Insuretech’s to own the end customers, they risk losing the relationship. But this business is about customers, not technology nor disruption.

It is exciting times for the insurance industry – InsureTechs are coming of age and perhaps the capital model and even the regulatory environment may need to change.