Bart Patrick, CRO, Genasys Technologies
The role of insurtech is evolving in the world. There has been much hype driven by inflated expectations, valuations and technological claims to be juxtaposed by a market that is seeing slashed valuations but a continued frenzy of funding. But what determines the potential for insurtech to join the winner’s enclosure?
Firstly, don’t forget insurance fundamentals. Insurance’s purpose is to drive underwriting profit. Investment income, reserve releases and other insurance income are just vanity. Sanity is premiums exceeding claims and the cost of going to market. Tip Number 1: Don’t chase market share it’s a sure fired road to failure. There are many rotten risks out there, and courting them to gain policies and volume will only result in frightening combined ratios. As Adrian Jones, MD of HSCM said “Insurance is a get rich slow business”. Winning the right business takes time.
Secondly, the hype is the enemy of business. Many start-ups have fantastical valuations based on inflated market growth expectations (see point 1 above for where this leads!). Many of these same start-ups have obtained a great deal of money from willing investors even though they are not scheduled to get into the positive side of the P&L for many years to come. Then they don’t. Many of these companies spent too much time in fundraising and networking to keep their eye on the commercial ball, and less time on selling what they have. So Tip Number 2. Make sure that you get your commercial fundamentals right. Create a product that can be sold at a rate people can afford, is available, is novel and makes you money – base what you do around this rather than a forecast of where you will be or investor expectations.
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Thirdly and finally for this piece, regulation is useful. The regulatory framework should be studied. It can help you with Tip Number 1. Make sure that you don’t underestimate the impact of being in a regulated market, the time it takes you to get things done and that regulation is arguably your friend. Tip Number 3: See how you can use regulation to prevent insurance mistakes.
Ultimately Insurtech is something to celebrate, and South Africa has some of the most impressive start-ups I have seen, built for social good and leveraging technology in this quest. Insurtech has brought a fresh perspective to the market and made insurance cool again. I for one wish to see a vibrant, challenging and stable insurtech market.
Many of the current insurtechs have come up with products and technologies that are good for your technological and innovative soul. Long live insurtech.