InsurTech is one of the hottest topics ofconversation in the insurance industry, with executives andprofessionals of all types joining in.

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The InsurTech startup movement began in earnest about threeyears ago and is still trending upward in terms of startups,funding, and activity.

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Related: InsurTech takes aim at personal linesdistribution

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Early insurer participants were primarily the large Tier 1insurers, but a new wave of activity is reaching companies in themiddle and smaller tiers. Strategy MeetsAction (SMA) tracks InsurTechs globally (almost 1,200 now),mentors and advises InsurTech firms, and assists insurers withInsurTech strategies. Our research and analyses include assessmentsby line of business and business area. 

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SMA's recently released research report, "InsurTech and Personal Lines: Examples, Use Cases,and Implications," analyzes the current state of the InsurTechworld for P&C personal lines insurers. There are over 600startups that SMA has identified as relevant for this industrysector. Despite all the activity and investment in InsurTech, thedebate continues about its implications.

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Should insurers view InsurTech as a threat or opportunity? WillInsurTech disrupt the industry, or will the movement fizzleout?

Major role in insurance transformation

SMA's opinion is this: InsurTech is important. It's not goingaway. It will play a major role in industry transformation, andinsurers of every size must have a proactive strategy (even if itis just a defensive one).

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Distribution is a hot area for InsurTechs in personal lines andis already having an important impact. New capabilities forunderwriting, claims, and other areas of the business arewidespread and have great potential to improve operations, thecustomer experience, products, and the management of risks.

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It's true that many partnerships and activities are in the earlystages, and the impact on business results is minimal in thecontext of the huge insurance industry. But InsurTech has been amajor trigger for new insurer strategies and will be an importantpart of the transformation of insurance over the next 5-10years.

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Regarding demographics, about 65% of the startups are techcompanies with solutions for insurers or agents/brokers. Theremaining 35% are organized as insurance entities: either insurers,agents/brokers, or MGAs. About one in five are focused ondistribution, either providing new tech-based capabilities foragents/brokers or as digital agents.

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The MGA model is increasingly popular among this crowd. Manymore InsurTechs are built around data, especially the real-timedata being generated by connected things.

Insurer-InsurTech partnerships now number in hundreds

Perhaps more important than the demographics are thepartnerships, investments, and projects that are underway.Insurer-InsurTech partnerships now number in the hundreds, and thedirect investment by insurers is in the billions.

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Related: 3 best practices for collaborating with InsurTechstartups

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The positive business results from projects are encouraging, butthe full impact will come in increasing measure over the next fewyears. Ultimately, we expect the personal lines insurance industryto look quite different in 10 years than it does today, andInsurTech will be one of the change agents.

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From an insurer perspective, InsurTech partnerships represent agreat opportunity to be leaders in the new era of insurance.

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Mark Breading is a partner atBoston-based SMA. Emailhim at [email protected]. This article firstappeared on StrategyMeetsAction.com, and isreprinted here with their permission. Opinions expressed in thisarticle are the author's own.

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