Traditional Re/insurers Are In Strong Position Difficult Tech Market: Sprout.ai
Traditional Re/insurers Are In Strong Position Difficult Tech Market: Sprout.ai
In 2023 and beyond, conventional re/insurers that can combine brand and technology will “win,” according to Roi Amir, CEO of the insurtech company Sprout.ai, as tech start-ups continue to struggle due to a sharp decline in financing across industries.
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According to Amir, tech funding has decreased significantly in 2022, especially in the insurance industry, with early-stage funding staying strong but significant falls in later-stage growth funding and values.
“Investors are tightening the purse strings and focusing more rigidly on growth metrics,” he commented. “This creates risk for insurtechs that require cash to fuel their growth. On the flip side, it creates opportunities for well-financed companies with deep pockets.”
Amir contends that the insurance industry is undergoing a transformation to what was seen in the banking sector 5 -10 years ago, with competition fuelled by growing customer expectations for service standards and pricing.
Traditional Re/insurers Are In Strong Position Difficult Tech Market: Sprout.ai
But at the same time, inflation is driving up costs for insurers, which will impact premiums for customers and may see traditional insurers taking back market share
“Inflation is driving up costs for insurers’ claims payouts as prices of goods, repairs, and services go up. Premiums take time to catch up with rising costs, resulting in lower profits and sometimes losses for insurers,” Amir noted.
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Insurers, therefore, need to look closely at overheads and find new ways to optimize operations and are seeing opportunities to segment the market and offer insurance products that provide more choice or target niche verticals.
“Going into 2023, traditional insurers have the brand advantage,” Amir concluded. “In times of uncertainties, customers may want to choose traditional insurers that are well-established, while new entrants may seem riskier. On the other hand, traditional insurers may have a higher cost of operations compared to technology-first insurance carriers.”
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“Traditional insurers will leverage this brand advantage and financial depth in the next year and will invest in technology that will allow them to provide better service at a lower cost,” he continued. “The ones that will do it quickly and smartly, will be the winners in this competitive market.”
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