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Will Fintech Startups Revolutionize the Life Insurance Business?

by Thomas Ressler

Financial technology startups invading the life insurance domain – “insurtechs” – are poised to dramatically overhaul the way the industry sells life insurance products to consumers. According to a new report from BI Intelligence, such firms are looking to reinvent the space in two key ways: “Consumer-focused players focus on eliminating the pain points that put consumers off buying life insurance coverage, while insurer-focused startups offer ways to improve processes and operations for the providers that still dominate much of the market,” the document said.

The company acknowledges there are risks to bringing new, and potentially disruptive, technologies into such a highly regulated industry. However, life insurers can use best practices to mitigate the potential exposure and reap substantial rewards. For instance, they can obtain full customer authorization to use their data, enlist tech-savvy compliance teams, and make customer education a priority. “Startups, meanwhile, should pick incumbent partners carefully,” according to the report.

“Incumbents’ activity in life insurance innovation to date has been limited to implementing some shiny new technologies, largely on the front-end,” BI Intelligence said. “If life insurance incumbents want to stay relevant, they’ll have to invest in the core systems needed to give them the freedom to innovate and introduce changes on their own terms.”

Elsewhere, a report by Accenture found insurers increasingly recognize that the advent of insurtech ultimately is more of an opportunity and less a threat and that they should collaborate more closely with this new breed of tech-driven startups. “But collaboration between old and new is not always straightforward,” the firm said.

For one thing, “Some traditional insurers are more than 300 years old, whereas many insurtechs are less than 300 days old. This can lead to significant challenges and differences surrounding culture, workforce, agility, and technology.” Also, both sides can fail to appreciate the opportunities that collaboration could afford.

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