Every end is a new beginning


It’s been two years since I started my first post on dailyfintech.com with, “Hardly anyone would argue that change and innovation are not necessary in insurance. The $5 trillion global insurance industry is large, complex and capital intensive. With various relatively untapped market segments and under-penetrated world regions, the onset of PE/VC investments did herald the beginning of buoyant sentiment for more dramatic change and innovation than the industry was known for.”

This is my final post here. The experience has been most gratifying, as I’ve dwelled on change and innovation themes with potential to make substantial impact on the insurance sector globally. In this post, I reminisce and recount from posts that received the most interest.

In the first of API-economy related posts, Insurance can learn from banking, the success of insurance-as-a-service models was mentioned as being contingent on the ability to deliver frictionless experiences and integration of operational processes. Achieving scale required on the one hand, business-as-usual capabilities for insurers operating white labels, while also, effectively managing large partner networks that industrialized management of the relationship.

In Platform businesses rising, digital ecosystems, orchestrated by powerful platform businesses and crisscrossing traditional industry sectors, were shown to top 30% of global economic activity by 2025. They thrive by efficiently matching supply with demand while solving deep entrenched problems, such as protection gaps. Growing from 12 to 40 partners over 3 years, such a platform business Swiss Re’s iptiQ has delivered consistent, impressive results. Through its partner ecosystem and API-led engine, iptiQ has helped individual firms achieve much more than they individually can, in effect becoming greater than the sum of its parts.

In a set of posts covering key metrics for insurtechs, the CAC post highlighted how in insurance, the cost of acquiring customers (CAC) is higher than other industries, at 7-9X that of selling to an existing customer. On average, that’s paying between $487 and $900 for each new customer. While a good CAC depends on the business line, one way to weigh this metric effectively is to balance it against customer lifetime value (CLV). Customers with higher CLV are worth more to acquire at the outset.

In a two-part series covering Web3, the first post mentioned – “The desire for more transparent, fairer relationships is fueling the growth of Web3. Global DeFi adoption is expected to continue to scale rapidly. Insurance organizations need to gear up, as the availability of Web3 insurance would likely stimulate the next big rush of vast user bases to enter the DeFi world. Web3 creates better alignment and behavior in insurance, the community being both the underwriter and the user.”

In a range of posts covering digitalization endeavors of incumbents, the AIG post showed how companies tackling digital disruption, after tasting initial success, see transformation programs frequently lose momentum, due to legacy issues such as technology infrastructure, misaligned operating models or a change-resistant culture. Competing against digital attackers ultimately requires transforming both hard capabilities (technologies) and soft capabilities (operating models) to create a conducive business environment for change enabled by digital technology. AIG200 makes for an interesting turnaround study, relevant to incumbents embarking on large change programs.

In yet another set of posts that covered larger insurtechs, the Hippo Insurance post delineated how technology approaches haven’t convincingly proven value in clearly quantifiable terms. Investors expect AI advantage to be reflected in lower claims frequency rate. Where the new insurtechs exhibit a technological edge, it tends to pale in relation to one significant disadvantage — their limited size.

Returning to my first post, I conclude with Professor Robert Shiller’s quote: “Radical innovation requires serious experimentation, serious effort to find the precise form of financial or insurance structure that will perform well, serious effort to educate the potential clients about the new risk management tool, a commitment by innovators to make it work, and an involvement with other institutions and thought leaders to make the variety of changes possible to make the innovation succeed.”

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End Note: I am grateful to Bernard for the opportunity and his constant guidance. Patrick Kelahan graciously passed on the baton, and it has never been an easy job to fill in his shoes. I am indebted to the many readers that appreciated the posts, those who shared feedback and kept my motivation high.