We believe large insurance carriers could bolster their valuations by taking equity stakes in leading InsurTech, AutoTech, PropTech, HealthIT, FinTech and CyberSecurity companies. Sound too ambitious? Sounds rational to us.
First, an announcement: We have launched a new Data & Analytics advisory service – “On-Demand CAO” – which is primarily geared to mid-market insurance carriers. Former Chubb and Gen Re Chief Analytics Officer Upendra Belhe will lead the effort for us. See our brief presentation HERE.
Insurers Should Aggressively Invest in Technology
Insurance carriers could bolster their valuations and drive superior operating results by investing aggressively in Technology. In recent years large insurance carriers have built in-house Analytics practices. A good start but not enough. The next round of insurance carrier Technology innovation could be accelerated if carriers are willing to augment their internal Technology investments with a formal Corporate Development program focused on Technology acquisitions. For some insurance carriers it may also make sense to create a corporate venture capital program (see American Family and AXA Insurance). A corporate venture effort could be combined with opportunistic M&A transactions ranging from outright acquisitions to minority stakes to acquiring warrants in desired target companies.
The strategic rationale for insurance carriers to have M&A programs is to infuse carriers with technology, data, analytic capability and domain expertise which may provide a sustainable competitive advantage and superior customer value proposition. A well executed M&A strategy would deliver new capabilities that would benefit insurance carriers across:
- customer acquisition;
- customer retention (a huge C-level focus);
- claims processing;
- fraud detection and more
The type of Technology capability we have in mind extends beyond legacy Policy Administration and Claims Processing systems. Those legacy systems are table stakes. An example of a modern, differentiating technology would be a machine learning-powered Life Insurance platform that automatically extracts data from EMRs and factors that information into Underwriting models without human intervention (straight-through processing).
In short, advanced technologies and analytic capability will enable insurance carriers to become more creative in areas that drive significant value (Underwriting for example), while creating new revenue opportunities. Higher revenue growth and profit margins should lead to higher valuation multiples.TEK2day-On-Demand-CAO-1