Traditional insurers will need to tap into technology-related opportunities presented by the insurtech movement to keep up with the changing taste of consumers, particularly the young and tech-savvy customer segments.
And with emerging technologies, such as artificial intelligence and blockchain, catalyzing the insurtech revolution and driving a myriad of innovations, the Capgemini/EFMA 2017
World Insurance Report said there is a need for insurers to design a comprehensive, multi-faceted strategy so they can ensure a return on their investments in innovation without losing their focus.
According to the report, insurtechs have changed the face of the market despite their short history – with nearly one-third (31.4%) of the more than 8,000 consumers polled worldwide saying that they rely on insurtechs or in combination with incumbents.
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Millennials and tech-savvy customer segments, in particular, find insurtechs appealing due to their convenience, agility, and the personalisation in their financial transactions. These customers, who tend to be less loyal, are an important source of potential incremental value as they are the ones most likely to buy additional products from their insurers, underlining the need for incumbents to cater to their preference for the digital.
The study found that on the whole, however, customers would want to maintain their ties with incumbents due to better performance when it comes to security and fraud protection (45.9%), brand recognition (43.7%), and personal interaction (41.6%); with 39.8% of customers saying they trust their insurers, as compared to insurtechs' 26.3%.
Insurers agreed that combining the complementary strengths of insurtechs and incumbents would be beneficial to both sectors, with 75% of the more than 100 senior executives surveyed from various insurance firms in 15 markets saying that developing insurtech capabilities would help them better meet customers' evolving demands, and 52.7% saying that having insurtech capabilities would help them quickly design personalised products.
“Increasingly, partnerships are being viewed as a welcome development in the ongoing effort to address the insurtech movement,” said Jack Dugan, EVP and head of insurance, Capgemini. “Insurtechs can help incumbents overcome roadblocks such as aging systems and paper-based processes. Meanwhile, incumbents can help insurtechs face newcomer challenges like high customer-acquisition costs and a lack of risk management experience.”
“The continued reliance of consumers on digital technologies that support mobile apps, social networking, on-demand services, and the like makes it clear that the mass market has entered a new phase,” said Vincent Bastid, Efma secretary general. “The insurance industry serves the masses and must adapt to the new terms of engagement. Collaborating with insurtechs, is an optimal way of incubating and accelerating digital innovation.”
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