Tech Trends

Insurance: Financial Technology’s Next Frontier

How financial services industry is managing disruption

by Timothy Bernstein, NewOak

NewOak is an independent financial services company, which provides strategic counsel and services around structured credit, complex asset valuation, enterprise risk, and regulatory compliance. Our offerings are built on four distinct but complementary businesses: Financial Services and Litigation Consulting; Financial Technology Solutions; Capital Markets Advisory and Asset Management. Visit


Global investment in financial technology more than tripled over the past two years, from just over $4 billion in 2013 to about $12.2 billion last year.[1]

Though the mandate of “disruption,” which essentially embraces any change to any paradigm at any time, is somewhat vague, virtually every part of the financial industry has undergone dramatic disruption in recent years.

Few sectors have seen the kind of growth that insurance tech has experienced. With the Affordable Care Act providing its own version of disruption, annual investment in insurance-related financial technology has increased almost tenfold since the Act’s passage in 2010, with more than half of that going to health insurance tech companies.[2]

Resistance to Change

At first glance, the insurance industry as a whole is a difficult candidate for change. In addition to inherent difficulties in pricing and processing inefficiencies, the barrier to entry is prohibitive, as byzantine regulations often vary from state to state and any group of people in the immediate market for a new product would likely carry higher insurance risks.

Yet change is happening, driven by the opportunities that the Affordable Care Act opened up for health-insurance providers, a seemingly endless flow of cash into technology startups, and targeting of industry areas that do have some disruptive flexibility.

In the area of price comparison, for example, startups like GoCompare and BizInsure are making it easier for consumers to find the most affordable insurance plan for their requirements. Peer-to-peer companies such as Lufax, a Chinese startup, and Prosper Marketplace provide a listing and bidding mechanism to find the most competitive rates on any given loan.

There are even attempts by startups to provide health insurance of their own. Oscar, which attempts to simplify the process of finding prospective treatment providers—the website allows users to type in their symptoms and go from there—has enrolled 40,000 customers as of April, and is valued at about $1.5 billion.[3]

Vitality, meanwhile, is underwritten by Prudential, but aims to make it easier for its customers to adopt healthier lifestyles by providing comprehensive health reviews and incentives that include spa treatments, cash back on pharmaceutical purchases and gym discounts.

Other insurance giants are following Prudential’s lead. Determined not to be lapped in the race to innovate, large insurers are providing much of the invested funds. Targeting areas like price comparison, lending and the robo-advisories of wealth management, American corporations like USAA and MassMutual and Chinese corporations like Ping An Insurance lead a 460% year-over-year increase in corporate investment in insurance tech startups. According to CB Insights, the 10 largest deals since 2010 that included participation by an insurance giant are:


These companies seem to be on the right track.  A recent study commissioned by Goldman Sachs estimated that the finance industry stands to lose nearly $500 billion in profit to technologically disruptive entrants—and for all of insurance’s supposed inflexibility, it has not been immune to change. As Billy Beane’s character in the film version of “Moneyball” put it with respect to disruptive innovation, “Adapt or die.”

[1] Accenture, “Growth in Fintech Investment Fastest in European Market, According to Accenture Study.” 26 March, 2015.
[2] CB Insights, “Insurance-Tech Startups Are Invading The Multi-Trillion Dollar Insurance Industry.” CB Insights, 5 June 2015.
[3] De la Merced, Michael. “Oscar, a Health Insurance Start-Up, Valued at $1.5 Billion.” New York Times, 20 April 2015.