Insurance is an industry that has long operated withoutsignificant disruption. Then insurtech quickly emerged to shakethings up.

Related: Digital transformation: 8 best practices forinsurers

Savvy consumers are looking for fast, easy, secure insurancesolutions, and these startups have developed innovative, advancedtechnologies. After little change for decades, establishedinsurers, agents and brokers who have become complacent now need tofigure out how they will adapt to digital disruption.

Many insurers see insurtech as a threat. Infact, more than eight of 10 financial services companies fearlosing some of their business to insurtech companies, according tothe PwC Global FinTech Report 2017. Additionally, more than half ofinsurers see their industry as the second most-likely sector fordisruption, following consumer banking.

Yet, companies such as Grinnell Mutual, a 100-year-old property and casualty insurance and reinsurancecompany, also realize there is an advantage in leveraging— and investing in — insurtech. To that end,Grinnell has been instrumental in developing an insuranceaccelerator, which is a group of insurance companies and executivesthat help startups navigate the insurance industry.

Investment in insurtech is big business. According to CBInsights data, global deals in insurance tech startups reachednearly $1.7 billion in 2016, with U.S. companies receiving 59% offunding. Investors are looking at companies specializing inindividual components of the insurance value chain such asdistribution, underwriting, claims and customer service, accordingto the 2016 KPMG Pulse of Fintech Report.

Related: The 'famous five': solving the InsurTechmystery

If InsurTech is such a threat to established insurancecompanies, why are companies like Grinnell Mutual so interested infunding new startups? While it's true that new players in theinsurance space could steal market share from incumbents, startupsaren't going anywhere, and their benefits shouldn't be ignored byestablished insurance companies, agents and brokers.

Here are five of the advantages my colleagues at Grinnell Mutualsee to investing in InsurTech startups:

Insurance industry incumbant benefit from tapping intostartup talent and thinking. (Photo: iStock)

No. 5: Learn new ideas and thinking from players whoaren't as close to the insurance industry.

While startups who participate in programs likeaccelerators will receive mentoring and guidance fromincumbents, established insurance companies also benefit by tappinginto the talent and mindset of up-and-comers. Since startups don'thave to follow an already established business model and process,they are able to reimagine and get creative about insuranceproducts and delivery methods that customers are looking for intoday's digital world.

Established insurers, agents and brokers might not have thecapability to get this creative themselves, but they canincorporate a startup's new thinking or solution into theirexisting business models.

Related: The importance of leadership in driving digital agechange

Don't get left in the dust! (iStock)

No. 4: Remain competitive by being at the forefront oftechnology innovation.

Insurance companies are already investing and partnering withstartups. So to remain competitive and gain an edge, insurers,agents and brokers should be looking into how they will adapt tothe introduction of new technology solutions. Startups are looking at ways to improve and extractprofits from almost every link in the insurance value chain,including distribution, underwriting, claims and customerservice.

New solutions will improve the customer experience, minimizefraud and maximize transparency — and simplify processesfor customers, agents and brokers. Insurers who haven't changed athing in years should be paying close attention to how these newsolutions could help them keep up with both traditional and newcompetitors.

Related: Insurers face new challenges in the age ofengagement

Startup relationships open up traditional insurers to newbusiness strategies and technologies. (Photo: iStock)

No. 3: Develop and combine existing and new insuranceproducts by partnering with up-and-coming insurancestartups.

By developing relationships with their new counterparts,traditional insurers will have the opportunity to learn about andadopt new technologies that will help them respond to the evolvingproduct and service demands of their agents, brokers and customers.There are some startups that become licensedinsurers themselves, like Lemonade, but this is rare.

The majority of startups are developing backend technologysolutions or are looking to partner with traditional insurers tobear the risk. These are the new players that incumbents will wantto identify and partner with to enhance and create new insuranceproducts and solutions.

Related: Rethinking a digital approach toinsurance

For agents and brokers, new digital platforms and planning toolsare increasing their efficiency while helping them better connectwith customers. New online and app-driven solutions are making itfaster and more secure for customers to sign up and processinsurance claims.

The so-called digital natives are looking for insurancesolutions beyond what many traditional insurers offer. (Photo:iStock)

No. 2: Help develop an ecosystem to supportinsurers.

With today's customer looking for digital solutions beyond whatmany traditional insurers offer, it is important for establishedcompanies to work with startups to develop an ecosystem that willsupport everyone. Partnerships will help improve operationalefficiencies and cost-effectiveness around creating morecustomer-centric product offerings for the industry as a whole.

Related: Insurance in the Digital Age: 3 steps to maximizingyour strategy

No. 1: Invest in the future of the insuranceindustry.

As an industry traditionally known to have slow tech adoption,it was ripe for change. Breakthrough technologies developed bystartups are already transforming the insurance space. Not onlydoes this give traditional insurers a chance to reinventthemselves, but those who embrace InsurTech now will be investingin the future of the insurance industry.

Kurt Eaves is vice president of Underwriting and Productionat Grinnell Mutual. He also serves as a mentor for techstartups through the Global InsuranceAccelerator and the Iowa AgriTech Accelerator. Kurt can bereached by sending email to [email protected].

See also:

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