Collaboration facilitates the development of a promising InsurTech sector. Through API-enabled back office technology, Munich Re Digital Partners is bringing more propositions to market, speedily and flexibly. Blue Marble, B3i, and Gen.Life demonstrate how shared R&D produces intellectual property for joint benefit but requires minimum resource investment. Cooperative incubation models are surfacing and global insurance accelerators such as Startupbootcamp and Plug and Play are proving that collaborative acceleration is a low risk/high return approach for embedding outside-in innovation. And on the investment side, Jerusalem Venture Partners, Eos Venture Partners, and Touchstone Ventures address the pitfalls of traditional corporate venture capital (CVC) and venture capital (VC) by leveraging the expertise of handpicked partners.

Background

Although internally run IT transformation programs, R&D labs, incubators, accelerators, and CVC funds are useful in upgrading dated technology systems, offering a customized exploration function, ingraining an internal culture of ingenuity, and leveraging advanced technology to develop customer-centric products, etc. When managed internally, these initiatives can be constrained by high upfront capital investment requirements and exorbitant operating costs, scarce skills, a limited network of subject-matter experts, mentors and investors, and delayed or slow delivery. The recent rise and accomplishments of collective InsurTech-focused corporate innovation models convey the compelling benefits of cooperation as explained further in this chapter.

Collaborative Digitalization

Digitalization: “the use of digital technologies to change a business model and provide new revenue and value-producing opportunities.”

Insurers face the daunting task of remaining relevant in a digital age of high consumer expectations, rapid product development and adoption, and condensed customer acquisition cycles. Further, they seek to provide a seamless and consolidated multi-channel and multi-product experience for their customers and this requires system upgrades, reformed process design, data management, and strong analytics platforms.

When this is coupled with the inevitable challenges of automating or digitalizing manual processes across the entire insurance value chain (i.e. integration and migration complexities, lengthy project timelines, high costs of execution) then the benefits of leveraging the resources of suitable partners are illuminated.

Munich Re Digital Partners (“Digital Partners”) was founded in May 2016 to allow the business to form more frictionless partnerships with startups developing InsurTech solutions. By setting up an independent vehicle, with a distinct and funded mandate combined with an API-enabled platform, Munich Re has ensured the venture’s ability to swiftly and flexibly absorb external capabilities to address ongoing business challenges and exploit arising opportunities. As a result, one year since launching, Digital Partners has already publicly disclosed nine partnerships with startups creating bespoke property and casualty insurance and health insurance propositions. Among its partners are Jetty, Simplesurance, and Trov.

Since these partnerships are gaining rapid traction, it’s anticipated that going forward more incumbents will replicate Munich Re’s digitalization approach.

Collaborative R&D

R&D: “a series of exploratory initiatives pursued to improve existing or develop new products and business practices from the ground up.”

As demonstrated here, some incumbents concede that emerging business models and technologies require cooperation among multiple industry players to yield sustainable and viable R&D results.

Blue Marble Microinsurance was launched in June 2015 by eight leading insurers and reinsurers to explore commercially viable microinsurance models to drive financial inclusion. Consortium members share costs, talent, and various execution risks to support the ideation, incubation, acceleration, piloting, and scaling of new ventures. Blue Marble currently has six ventures at different stages of acceleration across emerging markets. The most developed is a pilot launched in November 2016 providing drought protection insurance to 335 smallholder maize farmers in Zimbabwe.

B3i is an insurance industry blockchain initiative launched in October 2016 by Aegon, Allianz, Munich Re, Swiss Re, and Zurich to explore the ability of blockchain technologies to increase efficiencies in the exchange of data between reinsurance and insurance companies. At the end of 2017 the Blockchain Insurance Industry Initiative B3i announced it had expanded, with 23 new brokers and re/insurer entrants, which will help with B3i’s upcoming market testing program.

Since 2016 Gen.Life has been creating a Software-as-a-Service (SAAS) platform that enables insurers to create an intelligent digital capability across the entire insurance value chain. Gen.Life aims to act as the R&D centre of excellence for its insurance partners in exchange for an annual R&D licence fee. In return, the insurers gain access to Gen.Life’s AI and blockchain expertise and that of its partner startups; as well as Gen.Life’s highly scalable, adaptive, and intelligent technology stack.

It will be interesting to observe the relative success of all of these initiatives and how this influences future corporate R&D efforts.

Collaborative Incubation

Incubation: “the gestation of ideas that yield a return over the long-term into commercially viable propositions through the provision of a vast array of business support facilities, resources, and services for up to 36 months.”

Many organizations have delayed their adoption of cooperative incubation models due to concerns regarding IP ownership, data security, the development of generic vs. customized propositions, etc. However, due to the extensive capacity, facility, and resource commitments required to set up an internal incubator (e.g. AXA’s Kamet), the sustainability of this autonomous incubation approach is being questioned.

As a result, we are starting to see cooperation between incubation specialists and incumbents struggling to advance early-stage ideas into commercial propositions independently. Since November 2016 Fintech Circle Innovate joined forces with the Cape Innovation and Technology Initiative to provide a tailored incubation as a service offering to African financial services players in line with global industry best practices. Further, in February 2017 Worry+Peace teamed up with Mohara to launch an incubator to offer business development, product design, regulatory, and technological support as well as domain expertise and mentorship to UK-based insurance distribution startups. More recently, Exponential Ventures (MMI Holdings’ disruptive innovation arm) launched a financial wellness incubator in partnership with Anthemis Group, dedicated towards identifying business opportunities, refining business models, sourcing talent, and scaling startups.

It’s expected that more coalitions of this nature will surface in the future to support the development of more cost-effective and efficient incubation methodologies.

Collaborative Acceleration

Acceleration: “the rapid advancement of early stage startups into commercial ventures through a structured three-month curriculum supported by a meticulously assembled network of subject-matter experts, mentors, and investors.”

One of the more successful examples of fruitful cooperation has been observed in the collaborative acceleration of InsurTech startups.

Global Insurance Accelerator (GIA), based in Des Moines, Iowa, led the pack and was launched in February 2015. GIA’s support base comprises 180 mentors and 10 investors (who are all US-centric insurance carriers) and, together, they’ve been instrumental in the graduation of 18 startups who have collectively raised approximately US$2 million as at April 2017.

In June 2015 Startupbootcamp InsurTech followed suit primarily supported by 15 renown corporate partners (mostly insurers and reinsurers) who leverage their combined resources to fund the accelerator’s operations, mentor the startups, and explore various commercial opportunities with them. Further, the accelerator provides access to Startupbootcamp global’s extensive network of over 2,000 mentors, more than 1,000 investors, and another group of 130 program partners (financial institutions, retailers, data providers, government agencies, etc.) working across 20 international programs. So far 20 startups are alumni of the program, and as at April 2017 some of them had jointly raised more than $20 million in follow-on funding.

Plug and Play Insurance (PPI) is a Silicon Valley-based accelerator that was introduced in April 2016. PPI brings together 38 leading reinsurers, insurers, brokers, and automakers to support the fast-tracked development of insurance technology solutions by early- and growth-stage startups. To date, PPI has 48 startups in its portfolio and the first cohort has already jointly raised at least $39 million.

Although it’s early days, these accelerators are adding meaningful and measurable value to all their key stakeholders.

Collaborative Investment/CVC

Corporate VC (CVC): “a subset of VC in which established organizations make tactical equity investments into startups that are creating solutions that address existing business challenges or exploit emerging growth opportunities.”

Since 2015 a more cooperative approach to CVC has been developing and, so far, four distinct models have surfaced. The first model involves investments by incumbents in sector-focused third-party managed funds to gain access to market insights and a pipeline of various commercial opportunities. Old Mutual’s and Intesa San Paolo’s investment in Apis Growth Fund I and Transamerica Ventures’ investments in FinTech Collective and Lerer Hippeau Ventures possibly mark some of the earliest signs of this approach.

The second model entails partnerships between CVCs and specialist early-stage investors and is best demonstrated by Exponential Ventures’ investment partnerships with Anthemis Group, 4Di Capital, and Startupbootcamp InsurTech. Within a year of launching, Exponential Ventures has invested in six financial wellness startups and holds an interest in Startupbootcamp InsurTech’s accelerated startups.

The rapid emergence of VC funds that predominantly or solely invest in InsurTech startups encapsulates the third model. Their proposition gives investors access to vast domain experience and tried-and-tested early-stage investment expertise. Most are positioned to target insurers as limited partners, e.g. Eos Venture Partners, InsurTech Venture Partners, MTech Capital, ManchesterStory Group, etc., while others, like Annexus Ventures and InsurTech VC, operate as closed funds open to co-investing.

The final model is best captured by Touchdown Ventures’ (Touchdown’s) VC as a service approach. They leverage their reputable CVC track record and employ proven industry techniques to run bespoke CVC funds that allow their clients to maintain complete control over the investment process and, as such, produce precise outcomes tailored to each client’s unique objectives.

All these investment models have the potential to enable incumbents to produce tangible strategic and financial results from early-stage investments.

Conclusion

The case studies cited successfully demonstrate that, notwithstanding various constraints including the potential for lengthy negotiation cycles, high execution risk and misaligned priorities, collaboration creates opportunities to bring cutting-edge products and services to market rapidly, cheaply, distinctly, flexibly, and compliantly by leveraging the expertise, experience, and resources of each member within the partnership.