Insurtech: A Question of Balance

According to Shaun McKenna of DST, Insurtech provides a once-in-a-lifetime opportunity to reinvent and reinvigorate growth… but only if your house is in order as well.

In just five years’ time, today’s 14-year olds will be buying their first insurance product.

Think about that for a moment.

Many of these young people don’t know how to post a letter. They hate talking on the phone and barely use email. When the time comes, they won’t dial for a cab. They’ll tap for an Uber. They won’t talk to service desks. They’ll talk to Siri.

But that’s just the beginning. In five years, virtual and augmented reality, algorithms, robo-advice, artificial intelligence, and the Internet of Things will all become increasingly commonplace. To varying degrees, each will become a day-to-day part of the insurance service these young people expect.

They’ll also expect you to know what they need, offer them what they want, and make onboarding instantaneous. If they want to personalise down to the minutest degree, you’ll let them. If they want to buy as a group, you’ll let them. If they want on-demand (like auto insurance by the kilometre), you’ll let them.

In fact, you won’t just respond to these wishes. You’ll be expected to anticipate them.

And, if you’re not up to the task… no problem. There’ll be plenty of start-ups, spin-offs, unicorns, and global providers who are.

Game over.

This is the world that’s coming for the insurance industry. In fact, much of it’s already here. A recent DST UK survey – Consumers, Claims, and Key Concerns, found that 9 out of every 10 young adults now regard themselves as ‘primarily digital’ when it comes to dealing with insurance. And PwC has called out the insurance industry as the world’s second most disrupted industry, behind media and entertainment1.

The rise of Insurtech

That’s why Insurtech (Fintech for insurance companies) is now taking off. It’s being driven by thousands of companies worldwide using cutting-edge technology to reinvent insurance and appeal to the rapidly growing millennial market.

Companies like the New York-based Lemonade. Under the tagline ‘Instant everything. Killer prices. Big heart.’, Lemonade provides a completely different take on general insurance. Using an AI-driven mobile app, Lemonade makes taking out insurance incredibly simple. It offers low cost policies and a fixed, transparent 20% administration fee. And it donates any surplus funds (after administration, reinsurance, and claims) to charities nominated by the peer group each customer joins.

This rapid shift is clearly not lost on insurance companies. Our recent survey also found that 81% of non-life and 48% of life insurers believe they will lose customers if they don’t embrace digital2.

As a result, insurers are rushing to work with Fintech businesses in a new wave of collaboration some call Fintech 2.0. According to PwC, only about a quarter of insurers aren’t already dealing with Fintech. The other three-quarters are embracing it in a number of different ways.

Some are working with Insurtech companies that create point solutions for the industry. An example is Flamingo, which is now being trialed by AMP3. Flamingo has created a chatbot that guides customers through the sales process and, in doing so, supports the sales efforts of financial services providers.

Some are partnering with Fintech firms to access technology and new customers. A prime example is AXA, which has entered into a global partnership with Ant Financial4. In many ways, Ant puts Fintech into an entirely different perspective. We tend to think of Fintechs and Insurtechs as smallish start-ups and unicorns. But Ant Financial is anything but. It is the financial arm of China’s Alibaba, which is one of the world’s largest e-commerce firms. As a result, Ant already has a huge global market, customer experience supremacy, world-leading technology (such as Alibaba’s Alipay system) and an enormous financial base.

A third model involves incumbents actively investing in Insurtech. IAG has set up a $75m Insurtech venture capital fund and launched an Insurtech hub in Singapore . Also, QBE recently announced a $50m Insurtech investment5.

And Suncorp has provided equity to Trov – a mobile on-demand insurance provider that entered the Australian market last year6. With Trov, customers can add new items to their insurance policy simply by entering their make and model. At the same time, Trov gives customers the ability to switch their insurance cover on and off as they need to.

Yet another model involves incumbents taking Insurtech in-house. MassMutual, for example, used internal resources to build a technology-driven, stand-alone, direct-to-consumer business known as Haven Life7. Haven Life not only enables the purchase of medically underwritten term life insurance online, but it reduces the process from 4+ weeks to just 20 minutes8.

Haven is built around the same model as a great majority of Insurtech providers. It aims to simplify insurance with:

  • A simple, online application process
  • The ability to compare price and policies
  • Plain language policies
  • Immediate decisions

Is the insurance industry making donuts?

Clearly, Insurtech activity is now growing exponentially and incumbent insurers are clamouring for a position.

But there’s a potential problem with this focus on the new. And it’s a big one.

By focusing on Insurtech at the expense of their core businesses, insurers risk spawning an industry of ‘donut’ insurance companies.

By that, I mean incumbent insurers with lots of tasty technology around the edges, but a great big hole in the middle. A hole created by core businesses powered by out-of-date legacy systems that handcuff the broader business’ agility, scalability, innovation, efficiency, competitiveness and, of course, customer experience.

Our recent research put this reality into stark relief. It found that a paltry 9% of UK insurers believe they’ve mastered digital to a point of differentiation from their competitors.

Insurers must get their houses in order

The simple reality is that you can’t focus on Insurtech without a parallel commitment to transforming your core business. If you don’t have your house – your core operations – in order, the overwhelming bulk of your business will end up behind the eight ball.

You’ll never gain full value from your Insurtech investments. You’ll never be able to provide the simplicity and flexibility that customers are increasingly demanding. You won’t be able to evolve your channels and services with the speed you need to. As a result, you’ll constantly miss out on new business, lose efficiency opportunities, and disappoint existing customers.

Building a 21st century insurance business – one that can meet the demands of rapid consumer and technological change - requires a balanced commitment to transforming your core while exploring and implementing Insurtech solutions where needed.

Data analytics provides a powerful example of this.

Today, 89% of UK insurers are deficient in analytics and digital by design: they don’t use past interactions to support product recommendations or customer journeys. Based on personal experience, I’d suggest the situation is similar in Australia.

That’s a scary statistic. These companies are not only lagging a rapidly growing army of competitors, but they’re making critical decisions about their customers and their future with a blindfold on.

Through digital transformation, insurers can begin capturing and analysing customer data, building the capability to collaborate on solutions, and creating the flexible customer interfaces and back offices that will let them implement those solutions rapidly.

At the same time, they can turn to Insurtech firms, such as the San Jose-based Sureify, to help them enhance their data capabilities. Sureify gives insurers the capacity to improve underwriting, policies, and customer experience by helping them collect policy-holder data from mobile and wearable devices.

A question of balance

Today’s customers are demanding a new approach to insurance, and the demand will only grow with time.

Insurtech provides a powerful opportunity to navigate this change and build the capabilities that will meet evolving customer needs.

But Insurtech shouldn’t be seen as a solution. It can’t ready you for the future on its own.

It should be seen as an opportunity to further extend your reach and capabilities as part of a broader transformation strategy.

Donuts are delicious. But you can’t live on them.

Shaun McKenna
Head of Sales
DST Systems, Australia


1Insurers brace for mega fintech shake up, Ruth Liew, Sydney Morning Herald, March 24, 2016,

2AMP trials fintech Flamingo’s virtual chatbot “Rosie”, Alice Uribe, Australian Financial Review, January 23, 2017,

3AXA, Alibaba and Ant Financial Services announce global strategic partnership, AXA, July 29, 2016,

4IAG to open Insurtech hub in Singapore, Alice Uribe, Australian Financial Review, February 17, 2017,

5QBE to invest $50m in Insurtech, Nina Martin, Insurance Business, March 7, 2017,

6Suncorp buys equity in tech start-up Trov, Ruth Liew, Sydney Morning Herald, April 12, 2016,

7“Top Issues: An Annual Report”, Volume 8 2016, PwC,

8“Online Life Insurance Innovator Haven Life Launches in Additional 33 U.S. States.”, 27 January 2016, MassMutual Financial Group,

The views expressed in this publication are solely those of the author and do not necessarily reflect the position or policy of DST Systems, Inc. or its affiliates, subsidiaries, joint ventures, officers, directors, or management.

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