Other industries are being disrupted by new business models and new technologies, but the insurance industry has been slow to jump on the insurtech train. But that, says a new study, could put them at risk of being left behind.
In its study and survey of C-suite executives from traditional insurers, insurtech leaders and venture capitalists, IBM finds that while in other sectors of the financial industry, such as traditional banking, established businesses "are increasingly looking to partner with, acquire or even provide seed funding for new fintech businesses," the report says.
Banks are doing so, it adds, "to help drive efficiency and improved capability and service quality for their customers," with those who fail to do so risking "losing market share to their more nimble competitors."
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But the insurance industry is behind the curve, and only now beginning to catch up by partnering with insurtech. According to the report, 81 percent of outperforming insurers have either invested in or are working with insurtechs. Just 45 percent of other insurers have done so.
And while almost three in four insurance C-suite executives believe insurtechs are disrupting the industry, just 43 percent see this same disruptive effect on their own business, something that could indicate overconfidence in their own way of doing things.
And about that disruption: a little more than a third of insurtechs say their engagement with the insurance industry will be competitive, causing disruptive change, while 44 percent of insurtechs say they believe their involvement will be cooperative, with 52 percent expecting evolutionary development.
Among the ways that insurtech offers the potential to transform the business is the means to take an impersonal product with little personal interaction and personalize it for individual customers. Fifty-six percent of insurers said insurtechs present an opportunity to improve customer relationships this way. In addition, 80 percent of insurtech leaders say usage-based or other value-added services, such as hourly car insurance, is hastening an industrywide shift toward preventive advice and other forms of risk management services.
Then there's distribution. Insurtechs help insurers reach customers in new ways, with 26 percent creating fully digital solutions, 10 percent working in peer-to-peer insurance and 3 percent providing on-demand insurance for specific periods of time.
Globally, investment in insurtechs between 2014 and 2016 topped $5 billion, and by 2016, more than 30 percent of global insurance customers were using insurtechs exclusively or in combination with incumbent firms to fulfill their insurance needs.
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