Startup entrepreneurs are drawn to InsurTechventures for good reason, according to a recent report fromAccenture, the international managementconsulting and professional services company based in Dublin,Ireland.

Entitled "The Rise of Insurtech: How young startups and amature industry can bring out the best in one another," thereport found that innovation-driven growing pains in the insuranceindustry should ultimately bear significant fruit:

"We've seen a rapid acceleration of investment into and dealactivity around intelligent automation and IoT start-ups over thelast 12 months," said Roy Jubraj, a co-author of the report andAccenture's Digital & Innovation lead in the company'sFinancial Services practice in the U.K. and Ireland. "Thesetechnologies are primed to disrupt the industry in the years tocome."

Related: Silicon Valley venture capitalists looking todisrupt P&C insurance industry

Data from Accenture's Technology Vision for Insurance 2017determined that most insurers recognize the need and urgency toinnovate. Consider that:

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    • Eighty-seven (87%) percent insurers agree that technology is no longer advancing in a linearfashion, but rather at an exponential rate.
    • Eighty-six (86%) percent of insurers believe they must innovateat an increasingly rapid pace simply to retain a competitiveedge.
    • Ninety-six (96%) percent of insurers think that digitalecosystems are having an impact on the insurance industry

The report also cites data from CB Insights, theNew York City market research firm, that determined "both thevolume and value" of InsurTech investment in the United Kingdomalone doubled between 2014 and 2016, with total investment reaching$1.7 billion.

Related: When worlds collide: Insurers andInsurTech

Continue on for three distinct reasons why startup entrepreneursare drawn to InsurTech ventures.

Thirty AI-driven InsurTech startups launched in2016, according to Accenture. (Photo: iStock)

No. 3: Big data, analytics and artificial intelligence arehot.

The insurance industry now views these functions as essential toits ability to deliver the level of customer service andpersonalization demaned by today's digital-savvy consumer.

 Accenture's report found that the total number ofInsurTech deals based on AI and automationservice, or that fuel the IoT (Internet of Things) marketincreased 79 percent in 2016, which accounted for 44 percent, or$711 million, of total InsurTech investment.

Consider that the number of InsurTech startups just focused onbig data use more than doubled between 2014 and 2016:

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      • Accenture counted 24 data-driven InsurTech startups in2014.
      • There were 50 data-driven InsurTech startups in 2015.
      • There were 60 data-driven InsurTech startups in 2016.

Related: Embrace the shift! Transforming the insuranceindustry from the outside-in

Insurers struggle with the risks associated withinnovation. (Photo: iStock)

No. 2: Traditional insurers continue to face innovationheadaches.

The sheer volume of InsureTech startups coming to market hascompelled traditional insurers to step up their digital strategieswhile at the same time revealing significant challenges facing theindustry.

Among the innovation questions that continue to hauntinsurers, according to Accenture:

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      • Could the risks of high-tech disruption outweigh thebenefits?
      • How reliable is big data?
      • How committed are traditional insurers to fundamentallychanging their business processes?

The Accenture report quotes Renaud Million, co-founder & CEOof SPIXII, an insurance technology company based inEngland:

"I felt that the insurance industry was very traditional andsuffering from a communication issue with its customers, especiallythe digital customers," Million said. "For me, it was clear thatinsurance products should start from the customer rather than frompre-existing processes."

Related: Insurance 2017: Priorities for innovation,automation and transformation

It can be hard for traditional companies to makepeace with the need to team up with young businesses. (Photo:iStock)

No. 1: Incumbents now recognize the value of InsurTechcollaborations.

Researchers determined that some traditional insurers arebeginning to recognize their limitations with regards to internalinnovation, and looking for business partners who can help.

"I've been very impressed by insurers' willingness to learn, andthe involvement of the broader ecosystem (analytics firms,consultancies, conferences and the media) has also helped bridgethe gap between InsurTechs and traditional insurers," ErikAbrahamsson Founder & CEO of DigitalFineprint, a London-based company that gleans insurance datafrom customer social media use, told Accenture researchers. "Thatbeing said, we can always do more."

Accenture determined that 26 percent of incumbent insurerscurrently funnel cash into digital startups, and only 17 percent ofthem maintain an in-house venture capital fund for growing digitalor tech-driven business interests.

See also:

The momentum of a shifting insuranceindustry

5 mistakes agency start-ups make

In claims, all roads lead toinnovation