Out-Law News 2 min. read
14 Jun 2016, 10:27 am
Nine in 10 of the insurers surveyed by PwC as part of the research for its annual 'fintech' report, published in March, expected to lose some business, it said, in a new report compiling its insurance-related conclusions. The largest proportion of those surveyed, or 48%, said that up to 20% of their business could go to technology-specific companies.
However, the research also found an increasing proportion of insurers were now taking "concrete steps" to address the growing business need for innovation, whether through strategic partnerships or acquisitions or by developing their own new products in-house. Annual investment in so-called 'InsurTech' start-ups has increased fivefold over the past three years, with over $3.4 billion invested since 2010, according to the earlier report.
"Insurers need to encourage a culture of innovation and creativity within their organisations to ensure that the progress being made is not squandered," said Stephen O'Hearn, head of global insurance at PwC.
"There is a risk of missing an opportunity to deliver customers a similar experience to one they already receive from retail and technology companies ... Only be acting today and embracing both the challenges and opportunities presented by InsurTech will the industry be ready to tackle tomorrow's challenges. Those who are savvy enough to address the ongoing disruption sooner rather than later will reap the benefits and emerge as market leaders," he said.
In its March report, PwC found that insurance respondents were least likely to say that they wanted to put fintech "at the heart of" their corporate strategies. PwC received a positive response from 43% of insurance respondents; just behind 45% of asset and wealth management companies and considerably behind an 84% positive response from respondents working in payment and fund transfer institutions.
Although new technology has had the biggest impact to date in relation to lending and payment practices, PwC suggested in March that the insurance industry was beginning to be affected by a "second wave" of technology-related disruption. This was backed up by respondents themselves, with 74% of insurance companies identifying their own industry as the most likely to be disrupted by fintech over the next five years compared to 26% of non-insurance respondents.
According to the research, the growth of "self-directed" methods of both acquiring customers and servicing their needs is the top priority for insurers over the next five years. The report cited automated processes, and allowing potential customers to obtain a quote by "sending a quick picture of the driving licence and the car vehicle identification numbers, as examples of this. 'Usage-based' insurance, such as pay-as-you-drive insurance models for "sporadic" drivers, and insurance for ride-sharing and car-sharing business models, would also grown in importance; while data capture and analytics had the potential to improve risk and loss assessments, according to the report.
PwC's UK insurance head, Jonathan Howe, said that the company's findings demonstrated the need for insurers to partner with start-ups in order to stay on top of emerging risks and adapt their existing product portfolios in response.
"If the long-term mindset and experience of insurance companies can successfully be partnered with the creativity and agility of start-up companies, the industry as a whole will make progress in solving problems and brining truly innovative products to market," he said.