Only real insurers can turn InsurTech into a competitive advantage
While technology start-ups have the potential to provide very valuable information about customers, insurance companies are in better position to turn this data into a competitive advantage, according to a report from S&P Global Ratings.
S&P believes that big data analytics, for example, will need to be tied to industry knowledge if it is to realise its potential to disrupt the insurance business.
The number of emerging InsurTech trends in a broad variety of products offerings could potentially complement or change the insurance business model, S&P said.
In 2016, numerous re/insurers had announced investments in InsurTech, seeking to take advantage of digital solutions such as the analysis of large datasets, advanced modelling and analytics, and the creation of new client interfaces and tailored products.
However, S&P does not see InsurTech as a substitute for insurers, as insurance itself is highly regulated and capital-intensive, with high barriers to entry.
This considerable regulatory uncertainty regarding pure InsurTech companies will need to be addressed to ensure security, privacy, fair competition and financial stability, S&P suggested.
The report states that digitalisation has the capacity to support insurer efficiency, and can already be observed in motor health insurance, where claims are being reported through mobile applications.
S&P does not see any rating impact for insurers over the short-to-medium term from InsurTech.
In contrast with its banking equivalent, FinTech, InsureTech is not as developed, and S&P believes material effects may only start to merge in 10 years’ time.
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