A digital strategy will be ‘critical’ for the long-term success of insurance businesses, a new report has found.
In a new white paper released by global law firm DLA Piper, entitled Digital Transformation in the Insurance Sector,
the power of digital transformation is laid bare.
“For insurers today, an effective digital strategy is critical for long-term success. Insurers need to innovate, both to stay ahead of legacy competitors and to pre-empt the erosion and disruption of established business models by ambitious and nimble digital start-ups,” the report notes.
“The digitalisation megatrend is transforming the expectations of consumers across the globe, as internet and mobile phone usage increase year-on-year.
“Digital transformation is now seen as a key ‘game changer’ and catalyst for growth in the insurance sector, with the sector being ripe for disruption.”
Samantha O’Brien, a partner at DLA Piper and co-head of the firm’s insurance sector in Australia, said that as the digital transformation of the industry takes hold, many legal challenges come to the fore.
“Digital transformation in the insurance sector is critical to open opportunities and remain competitive, but with this transformation comes many legal challenges,” O’Brien told Insurance Business
“For example, creating robust contracts to leverage agile methods and processes can be hindered by strict governance and compliance requirements.
“And there’s a myriad of legal issues associated with capturing, processing and using big data. For those in the sector that operate globally, this creates significant challenges.
“The shift from people to software - which will inevitably lead to the need to upskill employees and or a degree of restructuring - will also create challenges for HR departments and legal teams.”
O’Brien stressed that while the insurance sector continues to invest heavily in insurtech and other technology avenues, more can still be done to improve digital transformation.
“They are investing heavily in digital transformation by establishing corporate venture capital funds to invest in new technologies and start-ups, establishing innovation hubs or labs and partnering with technology companies,” O’Brien said.
“But despite this, most players in the insurance sector are digitally immature, with only 23% able to submit and process claims digitally.”
Regulators continue to grapple with the changing nature of the insurance industry. The report notes that the Monetary Authority of Singapore (MAS
) joins a handful of regulators, including the FCA in the United Kingdom and ASIC in Australia, that “have worked hard” to encourage and foster innovation.
“The Singapore Monetary Authority (MAS
) is also looking to develop a sandbox, and is generally seeking to help Singapore develop as an Asian insurtech and fintech hub,” the report continues.
“Other regulators have been less sympathetic.”
Difficult to see an ‘Uber of insurance’
International law firm hires insurance specialist partner