3 min read

Insurtech is a relatively recent term in the insurance industry, but the use of new business activities enabled by digitalisation has meant opportunities for insurance providers to maximise their cost savings and enhance efficiency when compared with the traditional industry model.

There’s a strong conviction behind the insurtech companies which is driving disruptive, innovative ideas, and the only resource lacking in many cases is the capital required to invest in some serious research and development leading, with any luck, to further innovations and benefits for customers.

Why do R&D tax credits exist?

It’s that lack of financial resources which the research and development (R&D) tax relief initiative is intended to address. It was introduced by the government in early 2000 and is available for those expenditures incurred on R&D work (at least, those that qualify within the criteria).

In fact, R&D tax reliefs have always been among the most underclaimed of tax breaks. There seems to have been a strange reluctance, or perhaps, lack of awareness when it comes to taking up this government-sponsored offer.

They were, after all, originally designed as a way of rewarding UK companies for being proactive in their quest for innovation. Obviously, they act as a valuable resource for businesses wanting to turbo-charge their R&D activities, allowing them to take on new R&D recruits and keep up with the rapid changes taking place. These credits can either be cash back or a reduction in a company’s tax bill and can be claimed whether the organisation is profitable or loss-making.

Examples of R&D in insurtech

When it comes to insurtech R&D, what we’re talking about is the range of activities whose primary purpose is to investigate and make commercially viable genuine enhancements compared with existing technology. For this industry, that means exploring options such as;

Personalized Products rather than the one-size-fits-all off-the-shelf products which the current model favours.

  • Automation powered by A.I. for faster claim-processing and execution.
  • Advanced Analytics & Proactivity: this will enhance availability, protection and integrity of data, whatever platform it is being used on and wherever it is required.
  • InsurTech Partnerships: there has been significant growth in the areas of vehicle, home and cyber insurance. This will make traditional insurers realise they either need to acquire technological capabilities to exploit this, or form partnerships with InsurTech companies whose expertise will drive an agile response.
  • Blockchain: gigantic amounts of customer data is routinely processed and this development provides much greater security from end to end when it comes to claims, underwriting, identity management and protection against fraud. It also means reduced operational costs.

As digitalisation continues apace, the younger target market are looking for three key elements in the way they access financial and insurance services;

  • Personalised and customised services
  • On-demand and mobile usage
  • An ‘All-in-one’ access point (for example, an app)

The power of R&D tax credits

This is where R&D tax credits can make a difference. Just as in banking, the insurance industry will no longer be dominated by the enormous high street brand names. There are many smaller and agile companies that are entering this market with a digital-only array of personalised products and services. If what is holding their development is a lack of money to invest in R&D, they should take advantage of this tax credit scheme while they can, so they can establish their niche in the market.