Two of the country's largest carriers have decided to fully embrace insurance technology advances even as skepticism still abounds across the industry.
Through investments in and partnerships with existing insurtechs, Nationwide Mutual Insurance Co. and State Auto Financial Corp. have undergone major shifts in how they leverage technology to conduct their auto and homeowners businesses.
State Auto has committed to going "completely digital" by combining the efforts of its State Auto Labs Corp. with software and implementation partners, according to Chairman, President and CEO Michael LaRocco. Now, 80% of State Auto's products are digital.
Nationwide is going all-in on insurtech in the coming months with the rollout of Spire, its digital insurance platform. Spire will start out as an auto insurance portal, but plans are in place to expand it to include other Nationwide products.
A number of companies at a recent insurance technology conference talked about how they have created a network of insurtechs to help them achieve a certain "systemic innovation," rather than depending on one outside company to help them make a dramatic change, Sam Friedman, the insurance research leader for Deloitte Center for Financial Services, said in an interview.
"Putting together a whole series of companies with different capabilities is more the way to go, in some cases, if they really want to make a serious operational change," he said.
In Nationwide's case, it has made =investments with several insurtech companies, including Socotra, Betterview, Nexar, Insurify and Next Insurance. It also is partnering with Slice Labs, a cloud-based platform, to develop on-demand insurance solutions for Uber and Lyft drivers.
Scott Sanchez, Nationwide's first chief innovation officer, said the partnerships helped the company create "a more sustainable model for innovation."
"We want to bring people along the journey, and we want people to be proud of what we're doing," Sanchez said in an interview. "We want their expertise."
State Auto's LaRocco said having his employees embrace change at a company that has been in business since 1921 was exciting to see.
"You've got to kind of talk about the vision of where the industry is going," LaRocco said in an interview. "It's scary and it's different from what we've done before. It gets tough and it's frustrating at times, but you've got to keep showing that the journey is moving in the right direction."
"I think there are a number of carriers that may be playing a little bit of a wait-and-see game before they commit to any particular pipeline or strategy because I do think that the insurtech market is continuing to evolve," CFRA analyst Cathy Seifert said in an interview.
The insurtech trend has "significantly more legs," but there will be an evolution of these companies and not all of them are going to thrive, Seifert said. She expects to see some consolidation as insurtechs build out, which could be a reason legacy carriers are not ready to get closer to them.
Deloitte's Friedman said a new direction toward insurtech acceptance is coming after a long period of skepticism. He said there were concerns that the goal for insurtechs was displacement and total disruption of the industry, but the reality is that "none of them are the kind of existential threats that the industry may have feared a few years back."
"The overwhelming majority of these insurtech companies are here to help improve the industry's efficiency and capabilities," Friedman said. "But there's a lot of 'legacy thinking' out there, where you have a lot of insurers that have not been investing in this market, or they've been laying back, looking at the solution these people come up with and treating them like a vendor."