Andrew Johnston is global head of insurtech for Willis Re in New York. He heads a practice of about 30 people from various backgrounds charged with vetting hundreds of technology candidates on behalf of Willis Re clients, traditional insurers or incumbents. He recently discussed the changes and challenges in the insurtech sector and how the insurance industry is reacting with Business Insurance Reporter Matthew Lerner. Edited excerpts follow.

Q: How has insurtech changed and evolved during the recent past?

A: The term I think was coined in 2012 very much as an offshoot of what was then known as fintech, which is mainly any technology that was geared toward the banking sector, but it didn’t really come into the purview of our industry in a big way until the end of 2015.

We’ve seen multiple evolutions. I think we’re generally heading toward the space where you have to adopt almost like an investment model-type approach where out of 20 companies one might be interesting.

I wouldn’t say we’re narrowing in terms of total numbers of vendors, because there are lots of companies still coming in. It’s quite cheap to start up in insurance technology business at the moment. What I would say, though, is that the focus of the insurance industry is narrowing. People know what they want to get out of this space, and they’re less likely to be preoccupied by things that look sharp and sound great.

I also think we’ve learned ultimately that technology only really makes sense if it’s supporting an existing business model. If it’s not supporting bottom line improvements or top line growth relative to an existing business model, it is quite hard to integrate insurtech business.

What companies are doing is finding technology that either supports their historic book of business, supports their already existing growth strategy or diversification strategy. They’re less likely to kind of fall in that track of chasing something just because it’s got the name blockchain or AI in it.

Q: The traditional existing insurance industry is often referred to as “the incumbents.” How have they changed?

A: Companies are able to take their time. They’re able to vet. They’ve become more competent in vetting technology. I think we’re seeing people taking a slower, steadier approach but being very open to conversation, which is absolutely what industry should be.

The one thing recently that has changed the most is insurance and reinsurance company investment strategy. Generally, the investment is moving up the ladder, with insurance companies preferring to invest a little bit more at a later stage on a known entity. Some insurance companies are actually removing all of their investment capabilities altogether or they’re partnering with known investors.

Q: What are the chief challenges in insurtech? Cost? Technical? Security?

A: All of those things are actually concerns, and I don’t know that I could say the one is driving more than the other.

From a sort of higher-level view, I think one of the massive challenges has just been the convergence of two very disparate worlds, right?

You’ve got the kind of typically slower, more thoughtful, heavily regulated insurance industry who ultimately have to maintain controls, relationships in the market, be able to pay claims, and those kinds of things, against the backdrop of technology in very small, light, agile companies who are accustomed to working at a thousand miles an hour. To join those two worlds together I think has been a challenge.

As an industry, we’ve adopted technology systems that will work for 20 years. What we’re now working in is an environment where something can work for six months and you can spit it out and put something new in six months’ time, and culturally that’s quite a foreign concept in the industry. That’s another challenge I think we face.

Q: Does regulation play a role?

A: I think that one of the reasons why insurtech’s quite quickly moved from the kind of head-to-head, go-to-war-with-the-insurance-industry model of, say, four years ago to a very collaborative one now is that they don’t want the headache of having to deal with the regulators.

Any point at which an insurtech has to deal with the end consumer is a cause for concern for a regulator, so customer acquisition, for example, is a very difficult thing for insurtechs to have to try and navigate through, especially something like the states where you essentially have 50 different countries from a regulatory point of view. So it is tricky.

Q: In terms of the human element, Is the insurtech industry creating new job and roles and making others redundant?

A: Yes and no. The obsolete piece I think is inevitable, but I don’t think that it’s necessarily solely a function of insurtech. I think the market has always changed. There are jobs now that didn’t exist 150 years ago and vice versa. There were jobs 150 years ago that don’t exist now. I don’t know that insurtech can be held responsible for certain jobs being obsolete. I think that it can perhaps speed up the process.

Will new jobs be created? Absolutely. You’re talking to somebody whose job wouldn’t have existed five years ago. Data scientists or blockchain engineers or (artificial intelligence) specialists. These are all new jobs, right? So if anything, the employment pie is widening.