March 12, 2020 by Greg Meckbach, Associate Editor
It’s trendy for brokerages to partner with insurtechs, but it’s debatable whether more brokerages will do what Aon PLC did recently — buy an insurtech outright.
Aon closed its acquisition of CoverWallet Inc. in January. The New York City-based insurtech provides online quoting and binding for commercial clients. It’s a licensed agent in the United States that also provides technology to other brokers selling to small and mid-sized commercial clients.
“Only a few brokerage firms have acquired or made investments in insurtech startups so far,” Laviva Mazhar, an investment analyst with Montreal-based Luge Capital, told Canadian Underwriter. “That said, we are seeing an increasing number of brokers partnering with insurtech startups, which may eventually lead to investments or acquisitions.”
Investment from insurers and reinsurers is a growing trend for insurtechs, said Mazhar. She cited Munich Re Ventures’ investment in Next Insurance as one example. Munich Re recently announced it provided $250 million in investment capital to Next Insurance, which places coverage online to small U.S. businesses. Its offerings include a “real-time” certificate of insurance verification and a portal where clients can do things like add additional insureds and update policy or payment info.
Before agreeing to buy the company, Aon partnered with CoverWallet in Australia in early 2019 and made a strategic investment in the company, Mazhar noted.
“There is a lot of activity going on right now in the brokerage community as it relates to insurtechs,” said David Kerr, Kitchener, Ont.-based technology consulting partner for Deloitte Canada, commenting in general and not on any particular deal.
But much of this activity is around using an insurtech product or service, not buying the insurtech, he said.
Many brokerages lack the capital they would need to buy an insurtech outright, Kerr said in an interview. “Brokers out there need to be very aware of their place in a changing marketplace and look for opportunities to improve their value to their customers, and so insurtech solutions could be an option,” Kerr said.
Both managing general agents and retail brokerages are interested in differentiating themselves from the competition and serving their clients better. “More forward-thinking brokerages and collections of brokerages are evaluating what I would call digital brokerage offerings or insurtechs…to do things like online quote and bind; to do a degree of online servicing,” Kerr said.
When considering partnerships with or acquisitions of insurtechs, it’s important to consider whether the tech under consideration is able to do things that a traditional broker management system can’t do, Kerr explained.
“If I am doing quote-and-bind, with an insurtech as an example, can I do the billing part or not? What kind of client management is included in that? In what form is the data, such that I can get it to the insurer? There are a number of questions around integration and scope of functionality that are important ones to consider as they go down this path.”
Some brokers might want to use technology from two or more insurtechs, with each offering different pieces.
“The opportunities are marvellous for brokers to consider how to increase the amount of capabilities they have in-house through the use of discrete insurtech solutions,” Kerr added. “They shouldn’t have to shy away from that, but they do have to do their due diligence around the scope, the functionality and the benefits they get from that.”