Insurers embrace insurtech challenge
Global insurers expect insurtech growth to threaten their revenues, according to a PwC survey.
The 2017 Global FinTech survey shows that 86 percent of insurers are concerned that revenue is at risk to insurtech players.
From the global insurers participating in the survey, 56 percent believe up to 20 percent of their revenue is at risk to insurtech. A further 20 percent believe up to 40 percent of revenue is at risk. A smaller share of respondents, namely 10 percent, believe that more than 40 percent of revenues is at risk.
Although concern remains around losing revenue to new entrants, there is a growing understanding and acceptance of the benefits that insurtech businesses can bring to the established insurance industry.
“It’s undeniable that existing insurers are still concerned about new entrants muscling in on their revenue, and regulation and corporate culture continues to be a barrier for some when working with innovators,” said Jonathan Howe, global insurtech leader at PwC. “But in the end, whether it is partnering with, or acquiring startups, or fostering innovation internally, insurers need to find a way to bring the benefits of InsurTech into the mainstream. Our survey suggests that this is now about to happen.”
As the pace of change in insurance is accelerating, insurers are increasingly looking outside their own organisations in order to respond to business challenges and opportunities, looking to team up with innovators.
At the same time, 63 percent of existing insurers are concerned about regulation and data privacy when working with start-ups.
But overall, insurers have changed their perception of insurtech over the past year, according to the report.
“Undoubtedly insurers still have their reservations, but it’s great to see increased investment in technology such as AI and blockchain and an interest in partnering with others in order to make the most of this excellent opportunity,” said Stephen O’Hearn, global insurance leader at PwC.
Artificial intelligence is a major driver of change in the industry as 94 percent of insurers say customer engagement and generating better risk insights are the most important innovation trends for them.
Over half of respondents said that innovation is at the heart of their strategy. According to the report, data analytics will be the main area for technological investment in the coming year, with 84 percent of global insurers planning to invest in this area.
Partnering with, and learning from, insurtech innovators will help insurers utilise data to better understand their customers and reach new segments of society, the report finds. A large driver behind this success will lie in transitioning to a more preventative model (helping customers avoid accidents) as well as providing on demand, pay-as-you-go policies.
Howe noted: “Companies are increasingly waking up to the potential InsurTech brings. If insurers can successfully use AI and data analytics to help their customers prevent claims happening in the first place, while at the same time delivering the responsive service that they expect from other industries, they will be able to transform how insurance is viewed by customers."
The rise of data analytics will also allow insurers to focus on the opportunity brought about by the Internet of Things. Success with AI will free up the time of experienced professionals to work on more complex, judgement based decisions, according to the report. This benefit should not be underestimated, as 87 percent of insurers say they have trouble hiring and retaining people with the right skillsets to innovate. Insurers will also look to acquire start-ups, partner with innovators and foster internal talent in order to attract the right people for the future.
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Insurance, Insurtech, PwC, Innovation, Europe, North America, Jonathan Howe, Stephen O’Hearn
Insurers embrace insurtech challenge