Insurance carriers that invest in insurtech startups stress communication and collaboration as key to success.
While insurtech innovation has become more careful and deliberate than
"Our innovation team is five years in and its success has been because we truly have built those relationships for the organization," she said. "We just help [insurtechs] uncover a process and methodology and a way of working that they didn't recognize. Now, they can evangelize that."
Carriers that have innovation teams need leadership to harness their capabilities, according to panelist Gino Bonacci, president of personal lines at Gallagher, the global insurance brokerage. "If you can bring people along that journey, communicate, share what's going on, solicit their ideas, and show them how their ideas are part of the manager, it just becomes so much easier to get stuff actually done, and add value -- ROI," he said.
For its insurtech backing decisions, State Farm Ventures applies the Three Horizons Framework developed by McKinsey & Company, according to panelist Corey Schieler, director of State Farm Ventures. "Horizon 1," about maintaining and defending a core business, corresponds to the first year or two of activity by a startup that State Farm backs. "Horizon 2," nurturing emerging businesses, applies to a two to five year timeframe. "Horizon 3," about creating genuinely new businesses, is for goals for the next five to 10 years, Schieler explained.
That can be quantum computing and ways to "touch the business today and also position them for tomorrow," he said. State Farm Ventures recommends that the startups it backs focus on Horizon 1. For example, it invested in OneClick Code, a building code research service that makes it easier to get and use the correct codes for roof repairs following a damage claim. On average, OneClick Code saves State Farm $130 million per year in overpayment of claims, a significant savings for an insurer that spends about $10 billion to cover about 200,000 claims per year.
OneClick Code is a "poster child example of what works to get people to buy into the key point that they need to see it, they need to hear it and they need to see how [a startup tech] works," Schieler said. Generally, he added, the fund aims to "de-risk" its activities.
In contrast, Clearcover, an auto insurance startup backed by
"No one has to touch it," Nakatsuji said. "The customer talks to the robot. That robot solves their problem. That is not a risk anyone would be willing to take. But we felt we had the right. And we felt we needed to in order to innovate."
An insurer trying to develop technology in-house itself faces stricter limits on risk, as Webb of Aflac described. "That's why incumbents and companies like us partner with insurtechs," she said. "You can either partner and take advantage of a company that has been able to take that risk, which is one avenue we do, or if it's something that you want to build the competency within, then you've got to create a framework for experimenting and validating to show executives how you do risk capabilities."
