Interviews
Cristiano Gianni
Cristiano Gianni
Head of Health Beyond Insurance
AXA ITALY

The Integration of Traditional Insurers and Insurtechs: The Future of The Insurance Industry

~ 14 minutes

Digitalization is transforming insurance operating models, where insurance companies are integrating with Insurtechs. After the pandemic, some companies accelerated their digital transformation and are growing into the new normal. In this interview, Cristiano Gianni shares his insights and thoughts with regard to the future of Insurtech.


I see a big breakthrough due to pandemic, existing startups that were digital before COVID are going faster, and startups that before pandemic were not digital, but only physical, had to pivot their business model to grow again in the new normal.”

With the new historical investment rise, do you consider that the Insurtech market is still in a growth stage or is it going more towards consolidation?

I think there is a huge polarization between the two different conditions, driven by the disruption resulting from new habits that 2 years of pandemic has given us.

And this disruption is not finished yet because pandemic is still having an impact, with an imposed Digitalization as a positive legacy.

Customer needs and habits have been hanging and also Insurtechs and Startups need to take this into account: people are becoming more and more digital, and trend will continue to increase.

As results from this rapid change, today we are in a tipping point between consolidation and growth:

  • In the short term, we will see a phase of consolidation, where Insurtechs and Startups already aligned with new customers’ habits may reinforce their market position.

  • In the medium terms, we could see a new phase of growth, where new Insurtechs and Startups may come into the market offering a fully digital experience.

In addition, today consolidation is driven by massive fundraising of Insurtechs and Startups, puts them at least at the same level of traditional companies in terms of investment. To give some examples:

  • Doctolib, after 10 years since the launch, has declared an investment to enter the Italian market of 250 million euros and has already made 2 acquisitions (Dottori.it and Appocrate) continuing in a phase of market consolidation already lead by them in France.

  • Alan, after 5 years since the launch, has raise additional 180M€ to iterate on its core product (health insurance) and “turning Alan into a game-changing giant in the healthcare space” (from their website).

We see that Insurtechs and startups with an innovative and proven business model have an incredible opportunity to raise capital and launch their solution at scale, directly competing with large insurance companies that now paradoxically have fewer opportunities to allocate investment, also because they have to divided on different LoBs.

For this reason, I see in my opinion that there is not a consolidation of Insurtech market, but it is a consolidation of the entire insurance industry, of which Insurtech is part.

Startups are trying to push a new way of doing insurance where direct digital distribution is the new normal, but this clashes with the physical distribution of the real insurance world, when after IPOs, revenues and margins become important.”

Regarding post-IPOs results and the exponential growth of these startups, do you consider there’s more hype in Insurtechs than real impact in the market?

Innovation and disruption technology may help to raise capital. During the fundraising stage, the hypothesis of a new, seamless, customer-facing digital insurance company with online distribution is enough to create a relevant hype in the market and attract investors. Usually, at this stage, the relevance of an Insurtech in terms of communication is greater than in terms of revenues.

Post-IPOs, the situation radically changes: economics are the main drivers to evaluate an Insurtech performance and the original hypothesis of a fully digital distribution collides with consumers’ needs and behaviours, to whom physical distribution and consulting services are still important. They need to integrate typical aspects of traditional insurance companies, on which physical distribution is the most important.

After the IPO, Insurtechs need to demonstrate business results, and they may need to transform their business model by reintegrating the physical distribution channels, based on personal relationships with potential customers through agents and banking.

Anyway, Insurtechs creates a positive flywheel on a market where, traditionally, margins are defended by high regulation: they are able to push innovation in the market, playing a role of potential competitor and also of potential partners of traditional insures.

“I am convinced that the insurance industry is opening the barrier to integrate Insurtechs in the business model and Insurtechs are understanding better the operating model of insurance companies. Cultural mismatching is now less relevant, and the gap will be reduced.”

How do you see the evolution of the volumes of insurers’ investments in startups (both related and not related to the Insurance industry) in comparison to the last 5 years and how do you foresee it will be from now to the next 5 years?

Now we are in a phase of transition and the investment in Innovation from the insurance market is more mature:

  • More than 5 years ago, traditional insurers thought that they didn’t need to invest in innovation. After all, it was not a pressure on that because the regulation protected their margin, acting as an entry barrier: there were no new potential entrants in the insurance market that could create competition for insurance companies due to the regulation.

  • 3-5 years ago, Innovation was considered as a buzzword; lots of insurance companies communicated that they would like to innovate. We often saw a gap between the communication effort and a low level of investment and innovation projects on business ground.

  • Nowadays, the insurance market seems to will to invest more in innovation, especially to create a consistent competitive advantage; In this way we will see how investment could be focused more on accelerating the evolution of the business model and not merely linked to financial reasons.

Insurance companies understood that regulation is no longer the entry barrier it was in the past: Insurtechs’ business relevance is growing in the market and Digital Giants are looking for a potential entrance. It's very important to keep a competitive advantage that insurance companies keep the capacity to innovate theirs offer, also considering the new consumers’ behaviours.

In the near future we could see how the Investment of traditional insurers in Innovation (and Insurtechs) will accelerate, and driving to a new integrated business model in which Insurtech and insurance will partner to create the insurance of the future, leveraging on everyone’s distinctive assets:

  • Customer base and Distributors for traditional insurance companies.

  • Flexibility, Digital experience and best of breed operative model for Insurtechs.

I am convinced that this future would have a win-win shape, if the insurance industry will change the mindset, opening the barrier to integrate Insurtech in the business model, and Insurtech will understand better the operating model of insurance companies. Cultural mismatching is now less relevant, and the gap will be reduced. This creates a new world of insurance in which digital and technology are part of the operating model and will support physical distribution where agents / Banks / Brokers will continue to play the key role.

We see ourselves as an active and innovative player: in AXA Italy, we developed an open platform to accelerate the integration of existing Startups to innovate the health experience of our Customers, with a seamless hassle-free customer journey from prevention to cure.”

Does your company consider itself an active player when it comes to investment and partnerships with startups?

In AXA we believe that innovation is at the heart of our choices: we have an open minded approach trough innovation. We set a dedicated team at group level for innovation and in AXA Italy, we developed an open platform to accelerate the integration of existing startups to innovate the health experience of our customers, with a seamless hassle-free customer journey from prevention to cure.

Another project that makes AXA as a key player in innovation is our digital healthcare platform (DHP). This is a project launched at Group level in partnership with Microsoft in which AXA Italy is pioneering. DHP is an open platform in which external startups are part of AXA business model in order to simplify healthcare journey and empowers customers for accessing to a fully integrated ecosystem.

Again, I am convinced that insurance companies are not direct competitors of Insurtechs competition but both, Insurtechs and insurance companies, should work together to innovate the insurance market and generate additional value for clients.

Insurers are investing more and more in distribution channels and Commercial Lines of Business supported by Insurtechs rather than in Health companies. What is your insight on this? How do you foresee this trend for the following years?

Distribution channels are one of the most important investment topic at this stage; both insurers and Insurtechs are focusing investments there, but we can observe that there are different reasons behind:

  • Insurtechs may want to move beyond physical-first distribution activities, especially since this is the most important barrier to their growth today; their goal seems to be to create a seamless commercial customer experience.

  • Traditional insurers, with a more practical and mature view of the market, may want to modernize and digitize agency back-office activities (signing, payment, contract documents) to focus distributors' time on sales and business development activities; we see how this trend has been accelerated by lockdowns around Europe.

Commercial lines are a topic where modernization is needed:

  • Pricing methodologies remained traditional, without leverage on new Data capabilities to sophisticate pricing and risk analysis.

  • Business processes have been completely focused on physical site visits to analyse risks, instead of capitalizing from digital that offers tremendous optimization opportunities.

  • New risks are arising, such as cyber and business continuity.

In addition, pandemic has brought about a change in consumers' perception of risks; corporates started taking into consideration more risks and new scenarios with risks that were not considered in the past.

In terms of health, this stand-by situation is normal due to changes on healthcare driven by Covid; existing startups are re-adapting their business model according to the new customers behaviours, before reinforcing their growth and attract new investment. The health sector opportunity is still here.

What is your perception of the interest of Tech Giants in the Insurtech market? What kind of value do you see a Tech Giant can bring to a young Insurtech?

Tech Giants are corporations that can bring innovation, investment, digitalization, high level of services for customers, very competitive SLA, e.g. in terms of time to respond.

They can bring an evolved knowledge of customers by using very advanced techniques in tracking and using data, understanding customer habits and their needs.

They have developed sophisticated algorithms to propose services or products to customers based on their more or less explicit needs. They could be able to innovate the distribution and business model, but at the same time they lack industry-specific skills. Insurance technical knowledge is one of the barriers to entry in the industry, as is the regulator and physical distribution determinant for proper customer advice on insurance risks.

For example, insurance regulation is likely to be stricter than in the digital world in the use of data; a tech giant might routinely be more aggressive in its use of data than an insurance company, also taking advantage of the contextual presence in multiple countries given the non-uniformity of regulation. Given the industry's tighter constraints, tech giants may find themselves unable to use all their tools that can be used in the digital sector instead.

The role of the insurer will be different in different ecosystems because the owner of the ecosystem is the one that has good brand recognition and a very good distribution channel.”

We have seen mainly 3 roles in the ecosystems: owner, enabler, and participant. On the one side, we see insurers are participating in different ecosystems actively partners, but sometimes insurers are intending to build and own their ecosystems. What are the roles that you think that Insurers are playing in different ecosystems?

Insurance companies will play a different role depending on the ecosystem under consideration: the owner of the ecosystem will be the player able to have good brand recognition from the customer and a distribution channel with a strong relationship with the customer.

In addition, playing an orchestrator role in an ecosystem requires a significant level of investments, for example in communications and branding. For this reason, companies are required to identify the ecosystem in which they aim at playing a relevant role and which to carve out as a product factory role.

Despite this, trying to play an orchestrator role for companies will become a requirement:

  • Whoever plays that role and has the relationship with the customer will retain brand recognition and most of the margins.

  • Those who will be relegated to a product factory role will have low margins and high levels of substitutability.

Business boundaries are thinning, and the real competition is coming from the adjacent industry.

I'll give an example: in the auto ecosystem, the insurance company tends to be able to play a role as a participant in the ecosystem through its core insurance offering alone, as auto insurance coverage is mandatory, and it tends to be the customer's choice based on price; it is a commodity. In this scenario, I think the auto manufacturer can more easily play a role as an orchestrator of the ecosystem because it sells the most important product, with very good brand recognition, with a direct relationship with the customer where insurance coverage could be a bundled commodity. That is, of course, unless the company makes significant investments in differentiating its business model.

In other ecosystems it is not always so clear.

For example, in the health sector:

  • The insurer's brand remains a discriminator of choice because insurance coverage is selected by the customer paying attention to the level of service.

  • Large hospital groups play a central role but are relegated to a presence tied to the territory where they operate (barring exceptions).

In the health ecosystem, insurance companies can aim at playing the role of orchestrator: they can manage customers' needs from the first symptom to complete recovery in all phases of prevention, education, rehabilitation, and treatment.

How do you see the journey to ecosystems in your organization?

Our main priority is to be the orchestrator of the healthcare ecosystem: in accordance with our purpose, "act for Human Progress by protecting what matters," our ambition is to support the customer from prevention to cure, to enable them to live a healthy life.

We have signed a worldwide agreement with Microsoft to create the next generation standard of health and well-being services, through the use of data and technology.

Through this agreement, we launched our new health portal that integrates physical and digital services into one consistent customer experience by managing E2E the customer health experience.

We integrated in the same customer journey:

  • Digital services such as symptom checker, teleconsultation and chat with pharmacists.

  • Our new proprietary AXA Caring TPA with more than five thousand affiliated clinics to manage and solve traditional health claims.

  • Our proprietary diagnostic centers in which customers can treat their diseases.

  • At home services such as drugs delivery.

This can help us to be recognized as a Partner for health, not just a health insurance company, and to be closer to our clients from the very first moment of prevention.

“The intersection between technology and how it is rapidly changing the world and regulation with respect to how it looks at the use of data is the most important challenge we face today: finding the synthesis with respect to the stringency of regulation in the use of data and the analytics enabled by technology is going to be very complicated.”

What do you think are the main challenges that affect an insurer when we combine the terms regulation and technology?

The combination of technology and regulation necessarily calls up data and their use.

For a capitalization of the usage of data, it becomes necessary, for example:

  • Real understanding of the business problem that data are called upon to solve; this issue is critical otherwise we risk having very expensive projects that lead to no tangible results.

  • Convinced willingness to invest in new skills and technologies in the company, without which any project risks in turning irrelevant.

  • Regulatory clarity about what can be done with data and what is prohibited, especially with so-called sensitive/health data.

With respect to the three points, the first requires an awareness that the insurance world is ready to make and is already making on more evolved lines of business such as Motor (e.g. data collected from black box installed in vehicles).

On the second point, the competition from the Big Giants is fierce, with significant investment capacity: here I do not exclude a proliferation of partnerships to maximize results and reduce the investment for the parties involved.

On the third point, there would be a need to adapt the regulation, to respond to technology improvements and new consumers’ need / expectations.

The risk we may see is that we fall behind other sectors, creating a gap that is difficult to close.

“The digital transformation of insurance companies will progressively enable the integration of Insurtechs into the insurance operating model, speeding up innovation in the value proposition and customer service level.”

Which trends do you see becoming increasingly important?

I believe that open innovation with other platforms is a trend we will see more and more in the future. The Insurtech industry will be the insurance industry of the future, where traditional insurance companies will integrate with Insurtechs by sharing key distinctive assets to create a competitive advantage against non-traditional players who want to enter the insurance industry, Tech Giants first and foremost.

For this reason, it is very important that the business model and operating model of insurance companies will be open to integration with external vendors or partners to access new technologies with less investment and faster time to market. Open innovation will be the most important trend, where data intelligence is the first area of collaboration. What will simplify and accelerate this trend depends on the regulator, which will certainly have to clarify in detail what is allowed and what is not allowed with the data collected by insurance companies and Insurtechs.

Which was the top technology in 2021?

Artificial intelligence.

To make the most of artificial intelligence, it is necessary to:

  • Developing strategic technology enablers, open data platforms.

  • Integrate new skills traditionally not present in the company.

  • Clarify from the outset the business goals you want to pursue.

The insurance industry started talking about artificial intelligence few years ago, but it was not ready at that time. There were some early adoptions of this technology, but they were not successful. Now insurance companies are investing more in building databases. I believe 2022 will be the year when artificial intelligence will become widespread, yielding tangible results.

What is the highest hype in the Insurtechs? What are the models that you feel are not going to grow/have relevance in the future?

Insurtechs would need to be increased concreteness in terms of business generation, creating partnerships to refocus their distribution model from pure digital to omnichannel, also leveraging traditional insurance companies. Digitization will be key both to improve the customer journey and customer experience (e.g., digital services, simplified claims management) and to simplify operating models in order to reduce business costs (e.g. automating nonvalue-added activities and redirecting human resources dedicated to those activities to more qualifying activities).

In summary, the startups most likely to grow will be those open to creating partnerships and scaling through the existing customer base of insurance companies.