A new survey highlights the belief among insurtechs that the insurance incumbents are not doing enough to engage with startups.
The survey which was released jointly by Insurtech Australia and EY found that a solid 60 per cent of insurance start-ups are either in talks with incumbent players or already working with them.
Yet, a whopping 81 per cent of survey respondents think incumbent players are currently failing to collaborate and drive innovation in the industry.
Interviewees say they are struggling to get past the initial talks to form a partnership.
Addressing this gap is firmly on the agenda for nearly all respondents who listed partnering with insurers as their top priority for the next twelve months, the survey found.
Just 10 per cent of interviewees saw themselves as disrupting and challenging the status quo.
Enhance not disrupt
"This research underlines that fact that Australia’s emerging start-up ecosystem is looking to enhance rather than disrupt the industry," said Simon O’Dell, head of Insurtech Australia.
"Despite wanting to help, founders and their teams and struggling to gain traction with large insurance companies."
That said, he expects the 81 per cent to halve in a years’ time.
In O’Dell’s view, unlike the nation's insurance giants, Australia's mid-tier insurers and reinsurers are only now ready to implement digital strategies.
The report also examined the cost for establishing an insurtech in Australia, finding that 81 per cent of those surveyed are being bootstrapped by their founders, relying primarily on revenues generated from sales to fuel growth.
The survey discovered that one in four start-ups have raised more than $2 million in capital to date with 40 per cent raising capital offshore.
Only 38 per cent are at least partially equity-funded.
Crucially, only half of the respondents have enough capital to support their business for more than a year.
Concerningly, 56 per cent reported they had a runway shorter than 12 months.
"This was reflected by the top challenges founders said they faced, which included building the relationships with channels to market in order to reach customers, difficult sales and procurement processes within the industry, and a lack of capital to fuel growth," the report’s authors noted.
Strikingly, 83 per cent are already operating in New Zealand or other overseas markets.
EY partner Andrew Parton argued there was a need for greater collaboration between insurers and start-ups to drive innovation.
“Rather than view insurtech as a threat, insurance companies should be looking for new opportunities to work with start-ups and leverage their respective strengths to help create outcomes for their customers,” he said.
According to the insurance specialist, insurers need to work on their engagement style since dealing with insurtechs will be a little different to the way they work with other partners.
“Part of the problem is how do they collaborate quickly to get to a point of working out where the insuretech's solution matches a problem the insurer might have," he said.
"Ticking the "success" box of at the end of proof-of-concept stage is one thing but that hasn’t actual delivered any change or benefit to the business for the insurer."
As Parton sees it, a potential tie-up can then face a host of risk and security, legacy infrastructure, and technology issues.
“Then there is the challenge of how insurers gear up to get something new and different into production.”
Commenting on the survey, James Orchard, IAG’s executive general manager of innovation, said the insurtech landscape in Australia is growing, but it is not of the mature scale we see in other markets.
“We believe that everyone, including entrepreneurs, insurers and government, can do more to foster insurtech growth and create value for both start-ups and incumbents.
Orchard went further saying while insurtech is a key part of IAG's innovation strategy, "we recognise that to generate future growth we need to explore opportunities to enhance customer experience beyond the traditional insurance category.”
According to the latest CB Insights data report, the number of insurtech deals increased 39 percent globally in 2017, with the total value of deals up 32 percent, to US$2.3 billion.