Lessons of the Non-Tech Acquiring Tech Deal Of The Month

April 2022: Munich Re agrees to acquire Clareto

On 12th April 2022, Munich Re, one of the largest reinsurance firms in the world, agreed to acquire healthcare technology systems provider, Clareto, via its U.S. subsidiary, Munich Re Life U.S. The techquisition is another step in Munich Re’s core mission to reinvent the consumer's experience of insurance through innovative technology.

Tech – Clareto: Clareto is a developer of health information technology designed to bridge the information gap between healthcare and life insurance. The company's technology engages 25 health information exchanges (HIEs), healthcare providers, other data sources and brings the capabilities, expertise, and experience to facilitate the flow of health data, enabling life insurance industries with electronic exchange of health information in support of underwriting, claims, and other business processes.

Non-Tech – Munich Re:
Munich Re is one of the largest reinsurance firms in the world. It covers the entire value chain reinsurance, primary insurance, and insurance-related risk solutions. The company had ca. $65bn+ of gross written premiums in 2021.

COMPREHENSIVE ELECTRONIC HEALTH RECORD (EHR) SOLUTIONS FOR INSURANCE COMPANIES

The 12 April 2022 announcement of Munich Re acquiring MedVirginia, Inc., trading as Clareto, highlights the increasing need for integration of technology into the insurance businesses.

Munich Re Life U.S., a U.S.-based subsidiary of Germany’s Munich Re, partners with insurers to leverage smart and connected data, embrace new ideas and technologies, make confident decisions at speed and scale, and gain what it claims to be an exponential understanding of underlying risks.

Its optimized solutions and capital management expertise expand beyond market leading offerings in individual life, group, individual disability and living benefits reinsurance, to a global center for predictive analytics, automated underwriting, digital partnerships and standard setting underwriting and medical capabilities.

Munich Re Life U.S. believes the digital economy offers an unprecedented opportunity for the life insurance industry to rapidly advance risk assessment and close the widening global underinsured gap.

Clareto partners with 25 HIEs and other EHR data sources to facilitate the collection of electronic health information pursuant to HIPAA-compliant authorizations in support of underwriting, claims, and other business processes for the life insurance industry. Simple, it can help life insurance underwriters get to health record details in just a few clicks.

In 2021, for example, Clareto said it had negotiated an electronic health record deal with 1upHealth that would give it access to the EHR information for about 280 million U.S. patients.

The techquisition demonstrates Munich Re’s ability to adapt to cultural shifts and to serve consumer’s needs.

“With this acquisition, Munich Re will provide our life insurer clients with an entire set of new solutions to assist them in digitizing their underwriting processes – driving quicker decisions, delivering greater customer satisfaction and enabling new business growth”

- Marc Costantini, President, CEO Corporate Development, Strategy and Digital Solutions, Munich Re North America Life & Health

The deal rationale revolves around Munich Re’s goal to accelerate its digital transformation strategy and commitment to helping their life insurer clients grow their business intelligently. It will accelerate life insurers’ use of EHRs – the digital record of a patient’s care – as life insurers look to transform their underwriting processes and improve the applicant experience.

“The union of Munich Re and Clareto is a natural fit. As the availability of EHR data grows, we see a significant opportunity to combine Munich Re's capital strength and risk expertise, and Clareto’s access to health data to provide the life insurance industry with a comprehensive all-in-one solution.”

- Dave Dorans, CEO, Clareto

INDUSTRY DISRUPTION

The global healthcare information technology (IT) market size was valued at $250.6 billion in 2020, and is projected to reach $880.7 billion by 2030, registering a CAGR of 13.4%.

The global healthcare information systems market is primarily driven by the rising adoption of digital technologies across the healthcare industry.

The market is expected to experience significant growth because of the rise in demand for quality healthcare services and solutions, increase in acceptance of mHealth and telehealth practices, surge in demand for improved patient safety and patient care, increase in government initiative to promote HCIT, and surge in adoption of cloud technology in healthcare.

The Covid-19 pandemic resulted in nationwide lockdowns, thereby impacting every industry vertical. As a result, health care systems were affected, and the effective delivery of medical care and treatment to all patients has become a challenge worldwide. The Covid-19 pandemic has positively impacted the healthcare market growth and transformed the fortunes of healthcare companies.

The market for healthcare information technology is primarily driven by the rising incidence of Covid-19 cases globally, government mandates, support, and initiatives for HCIT solutions, the increasing use of big data in healthcare, high returns on investment for HCIT solutions, and the need to curtail escalating healthcare costs.

Due to social distancing the Covid-19 pandemic is providing opportunities for telehealth solutions, as social distancing is the only existing solution developed so far capable of minimizing exposure. In this regard, telemedicine and mHealth represents an attractive, effective, and affordable option.

North America accounted for around 46% of the market share in 2020 and was the dominant market. This is attributed to the increased adoption of the healthcare information systems across the hospitals especially in the small and medium units in the U.S.

Asia Pacific is estimated to be the most opportunistic market during the forecast period. The increasing government investments in the development of healthcare infrastructure and adoption of latest digital technologies is boosting the demand for the healthcare information systems.

Big data analysis has changed the way one can manage, analyze, transform, and do data modelling across various industries. The most important area where big data analytics is making changes is in the healthcare industry.

In healthcare data analytics, large scale data from the enormous healthcare industry is collected and transformed into actionable and valuable insights from costs, pharmaceuticals, clinical data, and patient behaviour which are the key areas of healthcare.

The information gathered by healthcare analysis provides insights that would improve the performance of the industry and help in save lives of people. Furthermore, data analytics also provides real-time alerting in healthcare. The use of various software to analyze data on the spot helps health practitioners to make prescriptive decisions thus supporting the growth of the Healthcare IT Market.

Moreover, increasing penetration of smartphones & internet connectivity along with supportive measures and initiative taken by government make an impact, as do rapid developments in mobile technologies and applications, a rise in new opportunities for the integration of mobile health into existing eHealth services, and the continued growth in coverage of mobile cellular networks.

CLEAR TRANSFORMATIONAL OPPORTUNITY

Munich Re’s techquisition of Clareto, while relatively small as a transaction, is expected to lead to a very impactful offer of a complete integrated solution. By acquiring Clareto, Munich Re will have access to more than 25 health information exchanges (HIEs) and electronic health record (EHR) software vendors.

The company is attempting to automate as much as possible, along the entire value chain and across all units while continuing to increase efficiency.

Driving digital transformation is one of Munich Re’s strategic priorities and is part of the company’s Group Ambition 2025.

Therefore, the company is also heavily invested in the development of new technologies such as robotics, artificial intelligence, and voice technology. In doing so the company intends to make their processes and operations more efficient and intelligent to enhance customer experience.

Munich Re’s techquisition of Clareto should accelerate life insurers’ utilization of EHRs as life insurers look to remodel their underwriting processes and enhance the applicant expertise.

Clareto’s access to EHRs enables life insurers to replace traditional, manual and time-consuming methods of obtaining information regarding an applicant’s health during the insurance application process.

Consistent with Munich Re’s digital technique and dedication to serving to their life insurer shoppers to develop their enterprise intelligently, Munich Re’s acquisition of Clareto should allow Munich Re to construction EHRs for optimum use in life insurance coverage underwriting.

The strategic logic of the deal is clear: Munich Re will ensure that digitized health information is optimized for quick and accurate decisioning – thereby streamlining their life insurer clients’ underwriting processes and delivering a better customer experience. Furthermore, Clareto’s widespread access to EHRs should enhance Munich Re’s digital underwriting solutions and make its products even more attractive their life insurer clients.

THE QUOTE

"We look forward to leveraging our relationship with Clareto to deliver analytical insights from EHRs to enable and enhance the risk assessment processes of our life insurer clients.”

- Marc Costantini, President & CEO, Corporate Development, Strategy and Digital Solutions, Munich Re North America Life & Health

Munich Re’s techquisition of Clareto is a fitting example of how a traditional business belonging to the insurance industry is actively engaged in the journey of transforming itself to deliver greater value to its stakeholders – particularly its shareholders and customers – by properly positioning itself for the future, ready to tackle any disruptions, especially after a pandemic.

The essence of such a transformation unfolding is embedded in a strategy execution approach we have trademarked and call Techquisition, which my firm, Aquaa Partners, has designed and delivers to its clients every day as an experienced and trusted expert partner.

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