Australian insurers face stiff competition over the coming years but that hasn’t seen them invest heavily in innovation, leading research has revealed.
The latest KPMG
report, entitled A new world of opportunity: the insurance innovation imperative,
found that less than half of the Australian companies surveyed have invested in innovation while the majority feel investment will take an uptick over the coming years.
Australian insurers also listed their biggest challenge as competition from known competitors rather than outside disruptors as Martin Blake
's head of insurance in Australia, said the challenges of innovation are plain to see.
“Rapid innovation has created significant challenges for insurers with 48% saying that their organisations are already experiencing disruption from new, more nimble competitors,” Blake said.
“It is not just start-ups that are creating innovation challenges for the insurance sector. 40% of respondents say that increased competition from their existing competitors would create significant challenges over the next 2 years.”
“However, the report also finds that – while insurers clearly recognise the innovation imperative – most are struggling to catalyse innovation within their own organisations.
“More than three-quarters (79%) say that they are already running just to keep up with their day-to-day requirements. Almost as many (74%) say they lack the internal core skills needed to drive innovation.
“Australian insurers were no exception to these problems,” Blake continued.
More than any other region, Australia saw key opportunities in digital technology and its integration into business objectives and the use of customer data analysis to improve underwriting, pricing and marketing.
Blake called on the industry to increase innovation if it wants to survive in a similar form, as disruptors will look to pounce on any opportunity they are presented.
“The insurance industry will need to lift its game if it wants to increase innovation and fend off disruptors,” Blake stressed.
“Relatively few insurers try to get first-mover advantage and fewer than one in four had a specific person accountable for innovation. Collective responsibility is not proven best practice for developing and implementing a stream of innovation. Only 40% had a budget dedicated to innovation and less than 10% a hard measure of ROI from new products or services.”
Blake noted that the industry “seems caught in the innovator’s dilemma - much of the focus is on expanding products for existing customers or marketing current products to new customers,” while bigger ideas are being left off the table.
“Blue-sky attempts at completely new offerings are not central to strategy, although regulation may be a problem here, which some see as a barrier to innovation in the industry,” Blake continued.
“While many respondents collaborate with other companies and have partnerships with academics or other industries, many also look internally for ideas.”
Blake noted that innovation should not just come from insurers but intermediaries should also be looking to bolster their future positioning by looking at multiple innovations rather than a “silver bullet.”
“Insurers and intermediaries are increasingly finding that there is no ‘silver bullet’ to create a more innovative organisation; no ‘off the shelf’ package that drives new ideas.
“Instead, organisations will need to navigate their own path through this new world of opportunity, developing new business and operating models and new partnerships in order to out-compete and out-innovate their peers and bold new entrants.”