Insurers increase appetite for innovation as industry joins Fintech Pledge and UK insurtech investment grows
In celebration of UK Fintech Week, Tech Nation, has today announced new signatories of the Fintech Pledge. The Fintech Pledge, supported by HM Treasury and developed by the Fintech Delivery Panel, sets world-leading standards to accelerate the growth of the UK’s fintech sector by promoting valuable partnerships between financial institutions and tech scaleups.
In a move broadening the Pledge, six new signatories from the insurance sector - Admiral, Aviva, Brit, esure, Lloyd’s, Munich Re Digital Partners - plus Investec who joins as an additional signatory from the banking sector, demonstrate their commitment to keeping the UK at the forefront of financial innovation by strengthening their partnerships with tech scaleups.
This commitment follows the successful launch last year of the world’s first Fintech Pledge across the UK banking sector. The first five signatories of the Pledge; Barclays, HSBC, Lloyds, NatWest, Santander; have now implemented the core components to increase transparency and communication when engaging with prospective fintech partners, and continue to review best practice and share their experiences with the second cohort of signatories; Atom Bank, Co-operative Bank, Nationwide Building Society, TSB, and Virgin Money; as they finalise preparations to put the principles into action within the committed six month timeframe.
Increasingly, tech startups and financial institutions are looking to partner with each other to drive better consumer and client outcomes. For example:
Barclays has recently partnered with fintech scaleup Flux to provide customers with in-app digital receipts
TSB has signed a partnership deal with billing fintech ApTap, to help customers manage their bills and subscriptions more effectively
Digital Partners, a Munich Re company, partnered with scaleup Bought By Many (a member of Tech Nation’s newest Future Fifty cohort) to support the development and launch of innovative, customer-focused pet insurance
The UK’s insurtech sector growth
The new signatories sign at a pivotal time for the UK’s insurance and insurtech sectors, as insurtech sees rapid growth in the UK, increasing its weight as a strategic sub-sector for the UK economy. In March 2021, London-based Zego, which provides insurance to gig economy workers, raised $150mn and became the UK’s first insurtech unicorn. Looking at broader VC investment trends, in Q1 of 2021 alone, UK insurtech companies raised $187mn, representing 3% of all UK VC investment, and representing more than half of total UK insurtech investment in 2020.
The growing success of UK insurtechs has been largely attributed to the creative ways they address customers’ insurance needs in an increasingly digital economy, opening up new opportunities across the whole of the insurance value chain.
In a sign of increased appetite for insurance innovation, Aviva earlier this month introduced a new cyber insurance offering for SMEs to help them combat the growing threat of cyberattacks, and in March 2021, Lloyd’s launched the first version of its Core Data Record (CDR) for market consultation in an effort to standardise data flow through the market. In response to the boom in cryptocurrency and blockchain technology, new forms of decentralised insurance are also emerging, such as Nexus Mutual and Etherisc.
In response to the growing desire amongst both insurtechs and insurance firms to foster stronger partnerships with one another, Tech Nation’s Insurtech Board has today published a report on ‘Breaking down barriers to productive partnerships’ to explore how insurance firms and insurtechs can best work together to foster real relationships and drive higher levels of innovation across the industry. As an immediate next step, the Insurtech Board invites insurance firms to sign the UK’s Fintech Pledge and implement its key standards to continue strengthening and building the UK’s insurance sector.
John Glen, Economic Secretary to the Treasury, comments: “We’ve set out a plan for a more open and technologically advanced financial services industry – and the Fintech Pledge is accelerating our progress towards this goal. By committing to help fintech firms onboard, large established financial institutions are sending a clear message that the UK is the best place in the world to develop innovative financial services. I’m pleased to see insurers making the commitment to boost their partnerships with insurtechs, and ultimately deliver better services for people and businesses across the UK.”
Eileen Burbidge, Chair of the Fintech Delivery Panel and Partner at Passion Capital, comments: “Innovation from fintech and insurtech companies is not just shaping the future of finance, but of our whole economy. By building collaborative relationships with new and upcoming firms, existing financial services institutions can drive greater, impactful change as the sector is strongest and most resilient when it works in partnership to build back stronger together”.
Victoria Roberts, Director of Fintech Delivery Panel and Insurtech Board at Tech Nation, comments: “When large financial institutions and fintech scaleups work together, everybody wins. Established institutions may benefit from a new customer experience, lower risk variability and a reduced cost base. For fintechs and insurtechs, partnering can be an opportunity to develop their products and scale a new solution at pace. And society at large benefits when we encourage innovation, support entrepreneurship, and work to drive real change in the future of our financial services.”
Louise O’Shea, Chair of Tech Nation’s Insurtech Board, comments: “Efficient, transparent communication between large financial firms and insurtechs is the key to innovation - and to continuing the growth of the UK’s booming tech sector. We’re delighted that so many of the world’s leading banks and insurers are embracing the latest technology and data applications in the UK to help secure our nation’s transformation to a truly modern and resilient insurance sector.”
