Culture eats insurtech for breakfast: an article with Nikolaus Sühr from KASKO
This won’t be the first article you’ve read recently about insurtech. According to Statista, since 2016 the value of capital invested in insurance tech companies worldwide stands at $90bn. Venture capitalists and the press have been driven into a frenzy by the opportunities and possibilities this money could yield. There is huge momentum behind the idea that new specialist technology companies are going to revolutionise the way that insurance operates in the future.
However, with so many insurtech companies securing funding over the last couple of years, valid questions are being asked about the impact they can all have. Can the directors of these businesses deliver the expected financial returns? Which will be the winners and losers in this highly competitive race? Are claims about the benefits of this technology overly confident?
Technology alone is not the answer
Nikolaus Sühr is the CEO and Co-Founder of KASKO, which works with companies across Europe to launch and optimise insurance services. Since starting the company six years ago Sühr has observed the changing sentiment towards insurtech:
“Anyone who has worked in insurance will know that the industry has an efficiency problem in its administration and distribution. In my view, lots of new companies launching and branding themselves as insurtechs have focused on developing and selling technology as a solution. However, technology alone is not going to improve an organisation’s performance. The industry leaders are going to be those which get closer to the customer rather than hoping that technology alone will tackle the issues.”
Embedded insurance
Sühr believes there is a much larger opportunity in designing embedded insurance programmes where technology provides a supporting rather than a leading role. The emphasis is on changing the approach to an organisation’s sourcing and servicing, with the aim of building on customers’ existing trust. This obviously means that the provider need not always be an insurer and could be a car manufacturer, travel company or a retailer. In Sühr’s experience, the culture and level of collaboration rather than the technology is the critical ingredient in successful new initiatives. He explains:
“The most successful programmes we have seen are with insurers that have approached their plans in a different way. The culture is one of experimentation, where they ask questions of suppliers and look for ways to improve their operating model and distribution. There are now more technology suppliers than ever before, but unless you have the knowhow to find creative alternatives, you’ll only have a slightly more efficient process which is still under delivering. If you can create a new operating model which gets them closer to the customer then this will improve performance. Success is not down to the technology, which simply supports a new approach.”
Successful insurtech
In a mature and saturated market like insurance, the idea of ‘innovation’ is highly attractive to decision makers and investors looking to grow their revenues. However, there is pressure on new companies to provide a return on the investment they have received. Chris Hopwood is the MD of Financial Services Partnership, a marketing agency which advises financial services businesses:
“There are now a lot of new businesses in insurtech, fintech and regtech with highly ambitious growth plans. In such a competitive environment expecting big returns on capital, there’s a risk that misconceptions develop about what technology can deliver. Words like ‘innovation’, ‘revolutionise’ and ‘transformation’ have become common place. What we are seeing at the moment is reminiscent of the dotcom boom. Technology will have a role to play but the impact is likely to be slower than many would have us believe.
We have noticed that the most successful insurtech, regtech and fintech organisations are those that can create and build new propositions in close harmony with the established players. A lot of the success is down to their knowledge of the industry and the ability to test, refine and implement at speed.”
Insurance is not broken
Whilst there are undoubtedly inefficiencies in the industry, and many companies are looking for ways to adapt to the post-pandemic world, there is a risk that technology is seen as the only solution. Sühr believes there will be subtle changes in the way people buy insurance and adapting to this change will be the best way to achieve success.
“Most people evaluate their insurance once a year and many don’t want to spend time looking for alternatives. If you can get closer to consumers and businesses disinclined to switch, and provide a simple way to evaluate and obtain the same policy at a lower cost, then you unlock a huge amount of latent demand. In some of the discussions we’ve had, there is a resistance to approach this segment of the market. However, some insurers share our optimism. An initial trial has been very successful but without their openness to a different approach it would have been an opportunity missed.”
The ingredients for success
There is undoubtedly lots of speculation and coverage about the role of technology and a new age of ‘innovation’. Whilst technology will have a role to play in increasing efficiency, the extent to which it can completely change how the industry operates must be questioned.
Chris Hopwood believes that predictions about revolution should be treated with caution. “As Warren Buffet famously said – forecasts may tell you a great deal about the forecaster but they tell you nothing about the future.”
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