Creating Strategic Value through Financial Technology

CHAPTER 8InsurTech and the Future of Insurance¹

The stalwart foundations on which the insurance industry has established itself are, for the first time, under siege. Disruptive forces are challenging historical conventions in ways that would rid the industry of its value proposition, among them shifts in customer expectations, transformations in the macro‐economy and culture, and the emergence of new types of risk altogether. These trends and the introduction of innovative “InsurTech” technologies have accelerated the pace of change and appear likely to continue to do so. As the dust begins to settle, obvious gaps in the value chain have materialized where new InsurTech competitors from both inside and outside the industry are looking to capitalize.

While InsurTech presents new sources of potential competition, the insurance industry has historically been highly competitive and legacy providers have largely endured trends, cycles, and changes in the industry. The insurance industry today is relatively fragmented as it can be broken into the following key players: insurance carriers that price and underwrite risk and manage investments, insurance agencies and brokerages that are intermediaries and earn commission/fee‐based income, and the insureds who pay premiums and insure against risk. Of the $1.5 trillion in premiums written in the United States in 2014, they were roughly split between property and casualty insurance (auto, home, commercial lines, workers compensation, marine, ...