Insurance giant QBE is joining the league of big corporates looking to startups as a way of protecting themselves from disruption.
In its annual general meeting address this month, QBE chairman Marty Becker said the giant insurer could invest as much as $50 million this year in early-stage startups and tech ventures building disruptive solutions in the insurance industry.
“Our challenge is to harness the benefits of incumbency,” Becker said.
“While insurtech startups have raised more than $4 billion in early-stage funding over the last couple of years, generally with the goal of bringing smart technology to market, many of these companies lack a holistic product offering or a clear path to market. That’s where QBE comes in.
“Earlier this year, we started a formal and rigorous process to comb the insurtech landscape for early-stage businesses that would add greatest value to our business and to our customer relationships, with a view to partnering with — and investing in — the businesses with greatest potential.
“We are planning to invest up to approximately $50 million in these opportunities in 2017.”
According to Becker, the move comes after one of the strongest years yet for the insurance giant, which recorded a net profit after tax of $844 million in 2016.
QBE chief executive John Neal said QBE has already screened more than 200 technology companies “with solutions that looked beneficial to our business”, of which seven have been shortlisted.
“Our bias is towards analytics, digital and Internet of Things solutions, which we believe can add value to our underwriting and claims processes … many of these companies are not well placed to ‘disrupt’ any element of the insurance industry on their own, requiring the knowledge, experience and expertise of established players to succeed,” Neal said.
“Over the coming months, following due diligence I expect we will form initial partnerships with three or four insurtech companies.”
Fighting competition with collaboration
StartupAus head of data and insights Alex Gruszka says there is a growing trend of big corporates taking a more collaborative approach to working with the startup sector to ensure new solutions and emerging technology, like “insurtech”, don’t push them out of the market.
The trend is playing out across a wide range of sectors, says Gruszka, with a number of corporates like Telstra, Seek and even Harvey Norman actively plugging themselves into the startup sector through funding, investment in accelerator programs or the establishment of new innovation spaces.
At a recent event, Gruszka says he was speaking with the vice chair of General Electrics, who shared some of the thinking behind this.
“They acquired Daintree Networks, an Australian startup last year,” Gruszka tells StartupSmart.
“She was specifically saying they were looking to do this and change the model of corporate ventures to focus less on direct investor returns [and to] provide things back to the market.”
A key focus is on “risk mitigation” so “big companies don’t get disrupted”, Gruszka says.
He says this presents a great opportunity for startups interested in tapping into the larger corporate sector.
“Startups need to be able to show how they’re going to mitigate risk for their corporate, how their technology is being used with a corporate [and] how to prevent that corporate from losing some significant segment from their business,” he says.