Incumbent insurers worried about BigTechs
Written by Peter Walker
The insurance technology (InsurTech) sector is booming, but traditional insurers are increasingly concerned about the entrance of BigTechs into the sector , according to the inaugural edition of the World InsurTech Report from Capgemini and Efma.
A combination of surveys and interviews with traditional insurance firms and InsurTech firms, covering over 140 executives across 33 markets, showed that the industry expects disruption and new competition to come from companies and manufacturers like Amazon, Facebook and Google in the US and Alibaba and Tencent in China.
Among incumbents, 81 per cent identified Amazon as the primary source of potential competition, with 59.5 per cent pointing to other BigTechs and manufacturers.
This comes as the InsurTech sector saw investment increase at a compound annual growth rate of 36.5 per cent between 2014 and 2017. The report found that this growth was facilitating a new era of collaboration between challengers and insurance industry incumbents.
When asked about the current and potential impact of InsurTechs, 67.1 per cent of incumbent insurers said they could ‘redefine customer experience’ - with 91.7 per cent of InsurTech executives agreeing - while 36.7 per cent said they could ‘bring in new business models’ and 35.4 per cent felt InsurTechs would ‘enhance incumbent insurers’ capabilities.
Almost 96 per cent of insurers said they were looking to collaborate with InsurTech firms in some way, with a partnership and Solution as a Service (SaaS) approach widely favoured. The vast majority (77.9 per cent) said that ‘partnering to develop a new solution’ was their preferred approach, while 75.8 per cent said they wanted a SaaS approach to engaging with InsurTechs.
Only up to a third (32.6 per cent) said they were considering acquisitions.
When asked about the benefits of collaboration, 77.2 per cent identified ‘improved ability to enhance customer experience’, 59.5 per cent said a ‘faster time to market’, 46.8 per cent cited ‘new digital capabilities,’ and 40.5 per cent went for ‘competitive advantage over peers.’
InsurTech categories that are being considered for short-to-medium partnerships include data specialists (identified by 62 per cent of incumbents), claims management solution providers (51.9 per cent), front-office solution providers (51.9 per cent) and technology specialists (55.7 per cent).
“It’s clear that insurers and InsurTechs see collaboration as the key to success in the evolving industry ecosystem, with re-imagined customer experience at its heart,” said Anirban Bose, chief executive of Capgemini’s Financial Services Strategic Business Unit. “Finding the right chemistry between collaborators to create a sustainable, agile position in the industry is the key to determining who will be future industry leaders.”