Australia saw a 53% growth in the number of InsurTechs operating in the country as well as a 75% increase in 'active partnerships' between incumbents and InsurTechs, revealed findings from a recent Australian InsurTech ecosystem report by EY and Insurtech Australia. In the report's foreword, EY partner Jamie Smith and Insurtech Australia CEO & co-founder Simon O'Dell said that Australia's InsurTechs are maturing and playing an increasingly important role in the future of incumbents, especially in the health and life insurance markets.
Offering a broad view of the Australian InsurTech ecosystem, the report is based on responses from Australian insurtechs, insurers, brokers, agents and service providers. Nearly half (48%) of the respondents were from the general insurance sector followed by life (23%), health (20%) and others (9%).
With greater collaboration in the ecosystem, a clear majority of InsurTechs were found to be focused in enabling incumbents while there are relatively fewer attempting to disrupt the insurance industry. InsurTechs are also seen to be facilitating incumbents to become digital insurers as well as helping them to develop innovative insurance products and deliver services that better align with customer expectations.
In the aftermath of the Hayne Royal commission, the following insurance value propositions are helping incumbents to demonstrate that they are providing the right product to the right customer at the right price:
- New products to deliver better customer value propositions
- Innovative marketing and distribution
- Pricing and underwriting agility
- Efficient insurance administration
- Smarter loss prevention and remediation
However, the uptake of such propositions remains hampered by operational constraints, legacy systems, technological readiness, compliance issues and concerns over customer privacy and security facing incumbents.
In fact, only 18% of InsurTechs believe that incumbents are ‘doing enough’ to collaborate with them in driving innovation in the insurance industry. In light of these findings, the report urges incumbents to proactively remove barriers to working with InsurTechs and stresses that InsurTechs need to better understand how to be compliant in Australia’s insurance industry.
Increased global footprint
As more global players enter the Australia InsurTech market particularly from Europe and South Africa, over 30% of InsurTechs operating in the country were found to be launched overseas. At the same time, 28% of local InsurTechs were seen to have significant operations outside of Australia and an increasing number of them are planning to go global.
More financially stable InsurTechs
The investment landscape for InsurTechs also marked an improvement with a third of respondents taking their capital raising beyond the A$2m ($1.4m) mark, compared with 24% in 2018. Also, only 29% of InsurTechs were in pre-revenue phases in 2019 in comparison to nearly 50% last year. However, the report states that more needs to be done to ensure that access to capital does not limit the growth of both early-stage start-ups and the wider ecosystem.