How does fintech provide a reputation opportunity to insurers?

• Investment in start-ups is helping to avoid “insurance dinosaur” perceptions
• AXA is leading the industry through its start-up investment programme
• “Self-disruption” is key to UK insurers maintaining relevance in the fintech space

In our recent piece on the impact of P2P on the reputation of banks we analysed trends in P2P lending and how “altfi” upstarts are filling the SME funding “vacuum” left by UK banks. But banks are not alone in feeling the heat of digital “disruptors” encroaching on their turf. The insurance industry faces enormous challenges at a time when tech start-ups are “prodding the dinosaur that is the insurance industry”[1] and software is “eating insurance”[2]. But with these challenges are opportunities, as investors begin to recognise insurance as one of the final frontiers of fintech. As such, the insurance industry, in recognition that is has been “lagging behind”, now “wants to be ‘disrupted’”[3].

Which insurers have the best reputation for fintech?

Looking across to the US we find that some insurers are taking this on board. By both identifying an investment gap left by banks and appreciating the value fintech can bring to customer-centric innovation, fintech strategies are being forged in the US which promise to support SMEs, shake off insurers’ “lumbering” reputations and ultimately keep the industry financially strong.

The reputation case for insurers is clear, too. Analysing small business sentiment data from the first half of 2015, the top performing US insurers were:

Figure 1: Top performing US insurers for small business sentiment, Jan-Jun 2015

Figure 2: Relative share of voice for US insurers among small businesses, Jan-Jun 2015

While Lincoln Financial and Voya both achieve net positive scores for small business sentiment, AXA US leads the market by a significant margin (performing 9% higher than Lincoln Financial, which placed second in the index, and 15% higher than the US industry average of 6.08). 61% of this competitive gap is attributable to positive coverage of AXA US’s Strategic Ventures programme, a venture capital fund launched by AXA S.A. in 2015 which has seen the business make equity investments in multiple innovative insurance start-ups, including policy comparison platforms PolicyGenius and LimelightHealth.

AXA US’s activity during this period has been described as “innovating like fish schools” and “not waiting to be disrupted from the outside”. Furthermore, the global scope of the Strategic Ventures programme has allowed regional businesses, such as AXA US, to carve out their own role and messaging around fintech particular to the market.

What can UK insurers learn from the US?

While UK insurers have engaged in fintech thought leadership (e.g. Hiscox’s small business blog) and events (e.g. Aviva’s “hackathon”), the US experience demonstrates that there is a clear reputational return with the small business community from operationalising a fintech strategy, both autonomously and as part of a global programme.

Figure 3: Fintech mentions for UK vs US insurers, Q3 2015

The global reach of programmes like AXA US’s Strategic Ventures only serve to emphasise the benefit that scale can bring in terms of reputation among small businesses. Moving into “self-disruption” mode (as Aviva’s Andrew Brem puts it) is an essential transition for UK insurers to make if they are to maintain relevance in the fintech space and make the most of the reputational opportunities.

[1] Tech Startups Are Prodding the Dinosaur That Is the Insurance Industry, Fox News, 21 October 2015

[2] Software Is Eating Insurance: 10 VCs Sound Off On Insurance Tech Disruption, CBInsights, 16 October 2015

[3] This is the next revolution in fintech according to investors, Business Insider, 17 September 2015