Traditional insurers and reinsurers played a big part in fueling InsurTech startup investment momentum in 2017. By doing so, they tamed potential rivals, turning them into a source of technology to suit their evolving needs, according to Willis Towers Watson’s latest briefing on the sector.

Their increasingly influential role in InsurTech technology investment helped fuel a high-powered year. InsurTech funding reached $697 million in Q4 and $2.3 billion for the year, Willis Towers Watson said. The annual number is 36 percent higher than in 2016 and the second-highest total ever.

For 2017, 120 private technology investments came from insurers and reinsurers, of which 35 were made in Q4. Both were the highest totals yet recorded for the sector in any quarter and year, according to WTW’s report.

Also, 65 percent of InsurTech investments from insurers and reinsurers to date have focused on businesses that can make their own work processes more efficient in areas including product delivery, underwriting, claims and other administrative functions.

Rafal Walkiewicz, CEO of Willis Towers Watson Securities, said that insurers and reinsurers are making their old-school needs felt, taming InsurTech innovators to suit their interests rather than being threatened by them.

“By investing heavily in startups and technology, [insurance and reinsurance] companies appear to have assumed a semblance of control over the InsurTech revolution,” Walkiewicz said in prepared remarks. “During the year, conversations about disruption of the existing value chain evolved toward an efficiency-driven search for incremental innovation.”

Walkiewicz cautioned that “technology revolutions rarely result in redistribution of power among incumbents,” a term Willis Towers Watson uses to describe traditional insurers and reinsurers.

“It can be argued that incumbents’ collective response to InsurTech hype has diminished their ability to recognize true disruption,” he said.

Other report findings:

• 75 percent of respondents believe their company is moderately to extremely at risk of disruption.

• 72 percent of company innovation resources on average are focused on incremental technologies versus disruptive ones.

• Almost half of respondents said they pursue innovation in an “ad-hoc” way, which means their companies don’t pursue innovation first out of the gate or follow others.

The survey, conducted by Willis Towers Watson Securities and Willis Re, along with CB Insights, is based on responses from close to 600 insurance and reinsurance professionals.

Source: Willis Towers Watson Securities, Willis Re, CB Insights