Due to the emergence of a number of insurance technology (insurtech) start-ups, according to a report, insurance firms are facing increasing competitive pressure on all fronts.
The sector is being forced to rethink its model with the integration of technologies like artificial intelligence, blockchain and drones entering the insurance mix.
Nearly one third (31.4%) of customers relied on insurtech solutions – either exclusively or in combination with an established insurance company, found the World Insurance Report, published Wednesday by consulting giant Capgemini and non-profit industry body Efma.
“Customers are seeking more digital touch points for convenience, as customers experience in their daily lives that degree of personalization,” Keith Webb, vice president at Capgemini and co-author of the report, ssaid.
“And the insurance industry can’t actually lag behind, although I think that it still is lagging behind other sectors. But certainly it’s waking up to the fact that working in partnership with more insurtech firms – working in partnership with technology firms generally – through their innovation labs now which are fairly common, is definitely enabling more rapid, and more innovative engagement models with customers, that take them into that personalization stage that really customers are beginning to expect.”
Insurtech businesses is mentored and helped to be scaled up by several accelerator programs such as the U.K.’s Startupbootcamp and Germany’s Allianz X (part of the Allianz group).
Aimed at simplifying and improving the efficiency of insurance. Insurtech, an offshoot of the financial technology (fintech) sector, is a rapidly evolving movement.
But many consumers still favor the more traditional insurance channels, the report also found. mainstream insurance firms performed better than insurtech vendors at security and fraud protection said 46 percent out of the 8,000 consumers surveyed by Capgemini and Efma. On the other hand, 44 percent said they performed better than insurtechs at brand awareness.
And as a whole for the industry, trust was also relatively low.
Although with 40 percent of customers saying they trusted their insurers, and only 26 percent saying the same of insurtechs, mainstream insurance businesses again topped insurtech in this regard.
Better customer relationships and financial capital than insurtechs existed with incumbents (established insurance firms), Capgemini’s Webb said.
“The factor though that is a drag on customers is the fact that the incumbents currently do have very strong balance sheets, they have been regulated, their brands are well known, there is a degree of trust that they still have – all of those are major assets,” he said.
Instead of direct competition to improve the efficiency of the sector, more collaborative efforts were pointed at by the conclusion of the report.
Developing their own insurtech capabilities would help them meet demand, said the vast majority (75%) of senior insurance executives interviewed by the two organizations.
insurtech start-ups have still been “majorly disruptive” despite struggling to make their long-term business both scalable and sustainable, Webb added.
“I think the insurtechs have been majorly disruptive, because when they do come in with their new models, they have a different pricing structure, as well as different experience. So I think when they come into play, they’re highly disruptive on the industry,” he said.
He added: “The market is maturing to realize that it’s both the innovation and the challenge the insurtechs bring – the bravery if you like to exploit some of the emerging technologies – with the more mature firms with established customer bases. And bringing them together seems to be the optimal combination.”
(Adapted from CNBC)