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Summit View: What Drives Innovation in Regtech & Insurtech?

To prepare for our expanded FinovateFall conference on September 11 through 14, we’re taking a look at each of the six summit discussions that will take place on days three and four of the conference. Today, we’re previewing trends in regtech and insurtech.

Summit #4: Regtech and Insurtech

Regtech and insurtech have benefitted from the same technology innovations that have turned fintech into a booming industry for consumers, businesses, and investors. According to CB Insights, regtech startups have raised more than $3 billion in funding between 2012 and 2016 (102 in 2016 alone). And what compliance-enabling technologies are attracting the most regtech investment? Capital Confirmation, which provides secure document transfer and transmission for auditing purposes raked in $60 million. Vendor risk management innovator, Prevalent, also raised $60 million in funding last year.

Regtech is a broad category, with solutions that are applicable to almost every aspect of financial technology. Consider, for example, the RegTech Top 100 Power list compiled by Planet Compliance this spring. Looking at Finovate alums alone, we see a surprising diversity in the types of companies aggregated under the “regtech” rubric. ID verification and anti-fraud companies like Trulioo and NetGuardians shared the spotlight with data analytics specialists like Ayasdi, document processing innovators like Mitek, and even banking systems providers like Temenos and nCino.

The application of technology to the field of insurance is another area of fintech that seems like a no-brainer now that so many entrepreneurs and startups have embraced it. And while there is some debate as to whether or not insurtech is a part of fintech or an industry all to its own, there is no denying that many of the concerns that have propelled technological innovation in fintech are also at work driving disruption in insurtech. Big Data analysis and risk modeling, document transmission and storage, customer experience improvements that leverage mobile and other technologies to make it easier to shop for insurance products, are all components of the insurtech revolution. And this adds to companies like Finovate alum Insuritas that have simply leveraged technology to make it easier for community banks and similar FIs to offer insurance products to their customers.

CB Insights reports $1.7 billion raised by insurtech firms in 2016 for a total of 173 deals. Among some of the companies picking up funding in 2016 were Clover ($160 million, with another $130 million in May 2017), Bright Health ($80 million, with another $160 million in June 2017), and Cyence ($40 million). The unique health care system in the United States certainly creates ample opportunity for innovation in this space, as analysts have pointed out. But the rise in the number of insurtech startups in places like the U.K. and Europe is a reminder that there are plenty of insurance services beyond healthcare financing that technology can help provide.

Startups and Sandboxes, Challengers and Incumbents

What is in store for regtech in 2017 and beyond? One interesting prediction from Michael Meyer, Vice Chair International RegTech Association, is the rise of sandboxes as a way to incubate “dedicated testing spaces” for companies working on specific regtech challenges. “In this environment we will see companies with solutions around risk data aggregation; modeling, scenario analysis, and forecasting as required for stress testing; and, alternative approaches to AML/KYC/BSA to name a few,” Meyer wrote. “As with other domains in the fintech space, regulatory buy-in for regTech solutions will be imperative. Sandboxes can provide a means to that end.” Meyer also is optimistic on partnerships playing as much or more of a role than disruption when it comes to the relationship between startups and incumbents in the space. The role of sandboxes in the development of regtech startups will be one of the key focuses of the Regtech & Insurtech track at FinovateFall in September.

If greater cooperation between industry participants is likely to characterize regtech innovation, will insurtech be a better place to look for true disruption? In their look at top insurtech trends for 2017, Roger Peverelli and Reggy de Feniks argue that here too, incumbents and challengers will find value in working together. “Relationships between insurers and insurtechs will become much more intense,” the two wrote, pointing out that incumbents are benefitting both the specific capabilities of startups as well as “the culture at insurtechs and the way of working.” This was echoed by KPMG Insurance Partner, Murray Raisbeck, whose review of the insurtech/insurer relationship at the beginning of the year noted a “cross-pollination of leadership talent between insurtech and the traditional insurance sector during 2017.” Raisbeck suggested that the 2016 trend that saw a number of insurers creating Chief Data Officer, Chief Digital Officer, and CTO positions for the first time was likely to “accelerate” into this year. Additionally, Raisbeck sees insurers competing with each other to partner with or incubate the best insurtech startups. The winners among the insurers will be those best able to work with startups on their own terms, ensure connectivity between legacy systems and API technology, continued investment in quality data, and, not unlike in the regtech space “an acceleration of ‘proof of concept’ and pilot programmes” to speed development and eventual integration. Conversations on this relationship between insurtech startups and incumbents, as well as the prospects for disruption, will be a topic during the regtech & insurtech track at FinovateFall.

Just after the demo sessions at FinovateFall, our discussion days on the 13th and 14th present a great opportunity for deep dives and expanded discussions on critical issues in fintech. Join our live panel discussions with industry thought leaders, bank executives, and fintech professionals. Register today and save your spot.

Here’s a peek at a few of the planning conversations for the Regtech & Insurtech track at the Digital Banking Summit.

  • RegTech USA: Innovating Regulatory Compliance
  • Sandboxes and Start-ups: Supporting the development of an ecosystem
  • InsurTech Conversations: Meeting the challenge of digital disruption
  • Key trends in insurtech

This is the fourth of our six-part FinovateFall Summit Series. Stayed tuned for more on Thursday when we look at the different Digital Markets fintech is serving in 2017 and beyond.