“Digital Gold Rush” Drives Claims Tech Disruption, Accelerated Vendor M&A

Powerful forces are converging to drive M&A activity to unprecedented levels in the P&C insurance claims technology ecosystem, creating innovative technology enabled capabilities for carriers, agents, brokers and consumers.

(Photo credit: Ariel Palmon.)

Today there are adults who have lived their entire lives in a world of the Internet and e-commerce, and who lived an adolescence accompanied by highly sophisticated video games and the anytime/anywhere computing capability of smart phones. That may make e-commerce and the Internet seem like old hat, but The Information Age is still in its infancy. In fact, we are still in a kind of “Wild West” stage of information technology and about to enter a “digital Gold Rush” era, in which the gold is the digital data, and it is beginning to flow in torrents. This will have secular significance for the insurance industry across its value chain, and not least in P&C claims.

Digitization is already having a significant impact it will have across the claims technology and services supply chain, forcing supplier industry consolidation and compressing customer service cycle and response times to near real time. These forces will impact P&C claims technology as well as information and services provider segments which have historically been highly fragmented and privately owned and operated, where national consolidation and volume aggregation and the infusion of sizable technology investment led by professional management teams offer significant medium-term rewards.

  • Notable activity in this group is already apparent as consolidation accelerates in the U.S. and Canadian auto collision repair and related auto physical damage claims services segments as well as across property claims technology, database and software vendors.
  •  A salient example is the very large number of acquisitions of the highly fragmented automotive repair parts industry in North America and beyond by LKQ Corporation (NASDAQ: LKQ), now the largest  U.S. provider of alternative collision replacement parts and a leading provider of recycled engines and transmission and remanufactured engines in connection with the repair of automobiles and other vehicles.
  • Emerging activity of interest in this area of the industry includes multiple current initiatives around the development of an electronic parts procurement and e-commerce solution for the large (~$15B) and still highly fragmented and inefficient North American auto repair parts supply chain.

Of particular interest – and possibly the most potentially disruptive group of technologies of all – is the rapidly emerging “Internet of Things” or “M2M” (machine-to-machine) technology and its potential impact across multiple lines of insurance. Of related concern to the industry is the potential for non-traditional competitors to leverage M2M data and enter their business.  Recent acquisitions include Facebook’s purchase of the fitness and location app Moves; Monsanto’s buying crop insurance and data company Climate Corp. (which was started by former Google executives); and Google’s acquisition of the connected home devices and security company Nest Labs. The data acquired in all of these businesses – never before so digitally available – can be combined with advanced analytics to accurately establish and manage individual and property risks. And of course, collision-avoidance systems (CAS) and “self-driving” or autonomous vehicles from Google and others will eventually and permanently alter the auto insurance product landscape.

These powerful forces are all converging to drive M&A activity to unprecedented levels in the P&C insurance claims technology ecosystem, attracting increasing numbers of private equity and strategic investors, providing attractive exit opportunities and strategic alternatives for participants and creating exciting new and innovative technology enabled capabilities for insurers, agents, brokers and consumers.

 

Stephen E. Applebaum // Stephen Applebaum, Managing Partner, Insurance Solutions Group, is a subject matter expert and thought leader providing consulting, advisory, research and strategic M&A services to participants across the entire North American property/casualty insurance ecosystem. He will be chairing the Auto Insurance USA industry conference on April 16-17, 2020 in Chicago presented by Insurance Nexus/Reuters Events which focuses on the impact of emerging technologies and changing consumer behavior on the broad connected automotive, insurance, claims, information, services and repair ecosystem. Applebaum is also a Senior Advisor to Waller Helms Advisors (WHA) an investment banking boutique firm focused on the crossroads of the insurance, healthcare and investment services sectors and a frequent chairman, guest speaker and panelist at insurance industry conferences and contributor to major insurance industry publications and has a passion for coaching, mentoring, business process innovation and constructive transformation, applying disruptive technology, and managing organizational change in the North American property/casualty insurance industry and trading partner communities. He can be reached at [email protected]

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