The insurance industry is “playing catch-up” when it comes to technology according to a partner at Ernst & Young.
While other financial services are grabbing the technological bull by the horns and improving their businesses at the back-end and for consumers, insurers are limiting themselves.
Catherine Barton, partner at EY
, told Reuters
, that insurers are traditional and that is hurting their chances in the changing technological environment.
“Compared to many other industries, (insurers) are still playing catch-up. The sector has a very traditional culture,” Barton said.
A recent study from The Boston Consulting Group and Morgan Stanley also found that emerging technologies have the ability to disrupt the insurance industry and that those that get on board with technological change quicker, set themselves up for a massive windfall.
“The Internet of Things is likely to radically reshape product propositions in insurance, more so than in asset management and banking, and reduce the size of global risk pools,” said Adam Wood, head of Morgan Stanley’s European technology software and services equity-research team.
“Inexpensive connected sensors have the potential to transform offerings in motor insurance and in the home, health, and industrial settings. Insurers will be able to collect new data sets and assess risk in completely different ways. In some instances they will be able to act upon a risk in real time."
Wood continued that “there are significant financial implications for insurers. Our model of a ‘digitally born’ insurer suggests that embracing digitization could significantly reduce both expense and loss ratios”.
He also suggested that those that wait for the technological advance around them to take shape run the risk of losing market share to new entrants.
“There is a risk that new entrants will come into the insurance industry—potentially leveraging far more detailed customer insights than are currently available to insurers.
“We see already a lot of innovations showing the way, as well as a few significant moves in this direction. The long-term result could be lower returns as insurers lose control of the customer and become more marginalized providers of capital.”