Insurance firms may be turning away from in-house tech solutions and focusing on external partnerships according to market participants and industry bodies, as internal capabilities falter.

“Aviva has set up its Digital Garage, so that’s moved quite quick and got quite a lot of profile quite quickly, but Aviva as I understand it are questioning the premise of that. They had a chief digital officer (CDO) prior to that … and when [he] left, they didn’t replace that role,” says Andy Thornley, head of corporate affairs at the British Insurance Brokers’ Association (Biba).

“And similarly we’ve seen in other big firms where CDOs have left [and] they’ve not been replaced, so if you were to look at that particular snapshot you could perhaps say that some of the larger firms are looking at their approach and perhaps looking to partner with insurtech firms, and bring that expertise in rather than try to develop that within their own firm.”

Aviva CDO Andrew Brem left the company in September 2018 and was not replaced. “Rather than [digital] being its own separate entity as it was previously, it’s much more integrated into the everyday running of the business,” says a company spokesperson.

“If we look at what the trading environment will be like in the next five, 10, 15 years, there are some challenges there that unless bigger firms that are less agile do something about, will face further challenges and also potential threats,” says Thornley.

Aviva’s Digital Garage, an internal tech hub that launched in London in 2016, faced tighter cost controls in 2019, the FT reported in May. A spokesperson at Aviva told bobsguide that the Digital Garage is currently running, however did face decreased investment in June due to company-wide cost cutting. Also in May of last year, Insurance Insider reported that AXA had frozen funding to its XL Innovate venture arm, a pillar focusing on both internal and external tech investment. AXA and XL Innovate did not provide comment by time of publication.

According to Thornley, there is an industry-wide need to experiment within tech that is not necessarily acknowledged within a large insurance firm.

“I think it’s easier to allow an insurtech firm to have the freedom to create, if that makes sense, and then to use the learning and expertise within the firm,” says Thornley of insurers looking to external insurtechs.

His thoughts are echoed by Sabine VanderLinden, chief executive of Insurtech Business at Startupbootcamp and Rainmaking, who works to connect young insurtechs with investors.

“Because insurers are risk averse, what you are seeing is insurers are going to start collaborating more with businesses they feel are reliable, and of propositions which are going to be here to stay,” says VanderLinden.

According to VanderLinden, large scale insurers may take too long to build their own tech, leading to an abandonment of internal ventures.

“Most insurers have the legacy of wanting to build things themselves. That is the tradition in insurance companies – what you find is the more mature ones realise the benefits of partnering and learning from those young players, but what they will probably want to do is focus on the ones that are the most successful.”

Insurtechs recognise that large-scale insurers are increasingly looking to outside partnerships as their internal tech capabilities have been unable to keep up with the speed of innovation, according to Graeme Dean, head of insurance at global insurtech Cover Genius. Dean believes insurers must look outwards for innovation.

“However, the majority of [insurers] lack the technical capabilities and/or the global frameworks required to keep up with existing insurtechs who are growing and diversifying every day,” said Dean in an email.  

“Businesses in the insurtech ecosystem have spent years developing technology solutions and insurance distribution platforms that have addressed and successfully solved the hurdles of legacy insurers – specifically notorious claims issues. Very few traditional insurers have an end-to-end global insurance distribution capability available for any line of insurance, ready for integration, so they look to partner with existing insurtechs to help them open up those new distribution channels. That’s what the future of insurance distribution will look like and where we will see the most insurtech investment flows in the coming future.”