Global technology services, digital transformation and consultancy firm Capgemini has launched its inaugural World Insurtech Report, which finds that across the board, insurers see insurtech as a major catalyst for widespread, disruptive innovation throughout the industry.
The global insurtech sector has seen investment increase at a compound annual growth rate of 36.5 per cent between 2014 and 2017, with the number of deals rising by 29 per cent in the same period, from 94 in 2014 to 202 in 2017. Capgemini’s report found that a staggering 96 per cent of insurers are planning to collaborate with insurtechs in order to streamline their service provision and respond to the demands of digitally savvy customers; indeed, ITIJ has reported on numerous cases of major insurers choosing to back fresh, up-and-coming talent operating in the insurtech space. The industry is clearly in a transformative phase.
Interestingly, 78 per cent of respondents to Capgemini’s survey said that they were more interested in partnering with insurtechs than acquiring them, tacit acknowledgment perhaps that these new entities have the tech knowledge necessary to move forward and should be supported and allowed to do what they do best, rather than being immediately swallowed into the corporate hierarchy.
“The debate is over,” write Anirban Bose and Vincent Bastid in their preface to the report. “No longer is the impact of insurtech disruption in question. The industry appears to have collectively agreed that insurtech firms and innovation are here to stay. What’s more, the steady growth in funding indicates a hearty investor appetite for insurtech and underscores the sector’s proliferation. With an eye on the future, the focus has shifted from how to manage the insurtech movement to how to maximise opportunity by collaborating with insurtech firms.”
Positives and negatives
The report suggests that insurtech firms see themselves as competitive for the following reasons: their ability to focus in on and address specific, critical market needs; their agility; their collaborative approach and ability to integrate into established ecosystems; and their ability to develop sustainable competitive advantages. However, this being said, they still face some major challenges, including winning customer trust – after all, traditional incumbent insurers have been in the game for a long time, and have worked hard to inspire customer loyalty – and building brand recognition, not an easy task in a crowded, fast-moving marketplace. A complex regulatory landscape and a need for high levels of capital were also identified by Capgemini as hurdles for insurtechs looking to make their presence felt.
“The greatest impact insurtech firms are having on the insurance industry is that they server as a ‘wake-up call’ to incumbents,” commented Ingo Weber, Group CEO and Co-Founder of Digital Insurance Group, and a member of Capgemini’s Executive Steering Committee. “Insurers suddenly realised that the paradigm shift in technology will fundamentally impact the industry and put their existing business at risk. As a consequence, many insurers are now exploring how to drive digital innovations and partnerships with insurtechs that can support the transformation of their business. Adapt or die.”