InsurTech Futures: Brokers face disruption from start-ups, warns PwC's Howe

Brokers will be disrupted by InsurTech start-ups if they don’t respond to developing technology, Jonathan Howe, global InsurTech leader at PwC has warned.

Howe explained that a lot of the innovation currently happening in the InsurTech sector is directly relevant to brokers.

“At the starting point this isn’t disruptive because it all enhances the business model and can help incumbents do what they do better,” he continued.

“But a lot of what InsurTechs are focusing on could be very disruptive to incumbent brokers unless they respond.”

Start-ups
Howe also noted that insurers are increasingly partnering with start-ups and highlighted that the broking community had been slower to respond to the new entrants to the market.

“Brokers have looked at new technologies in some detail, adopted new and innovative approaches, but they’ve done that in house,” he explained.

“I’ve seen fewer examples of them talking to start-ups and looking to engage in that wider eco-system than I have from the insurance community.”

According to Howe, PwC has seen a growing maturity among start-ups in the UK over the last year, which has led to an increased understanding of what InsurTech is among insurers and a shift in focus towards how traditional companies can take advantage of emerging technologies.

“We see a lot more focus on new products and underwriting insight and automation, as well as a lot more focus on data analytics and predictive models,” Howe observed.

Risk
PwC reported in its 2017 Global FinTech survey that more than half of insurers are worried that up to 20% of their revenue is at risk to InsurTech start-ups.

However, Howe explained that many of the insurers taking part in the survey did not necessarily see this as a big problem.

“They’re saying that if they don’t do anything their revenue is at risk, but most of them don’t think they are going to lose it because they are responding,” he stated.

Challenges
But the industry still faces challenges when it comes to taking new technologies on board, including cultural and regulatory issues stopping incumbent firms from moving fast enough.

“You need a structure that allows you to experiment quickly, to learn quickly, and if you fail you fail with low impact, but with maximum learning,” Howe continued.

He highlighted that “InsurTechs have to be flexible as well”, adding: “This isn’t all about incumbents changing to meet the start-ups.”

Howe concluded: “The start-ups have to understand the environment they’re trying to work in and show that they can deliver their projects on a large scale.”

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