If major technology companies decide “flex their corporate muscles” in the insurance sector, it could change the playing field for everyone involved, KMPG has warned.The industry is already fighting off competition from online direct insurers, aggregators, white-labelled products and non-traditional players such as supermarkets, as well as the strict regulatory environment, and the next challenge could come in the form of technology companies.
Scott Guse, Asia Pacific head of insurance accounting for KPMG
, said: “The question remains as to where the next round of competitive challenge will rise from. If the major technology companies flex their corporate muscles in the insurance sector in a manner similar to their entrance in other industries, it could very well change the playing field for all involved.”
Guse said insurers still have the “strong potential” to innovate their customer experience and product offerings: “We believe cyber security insurance will grow as a product class, with more customers starting to pay attention to this aspect of their business and gain clarity on what they want to achieve from such a policy. On the customer experience front, insurers are really only beginning to look at how they can better use their customer data to provide better service and drive efficiencies.”
Guse noted insurers are willing to sacrifice premium growth for a higher quality portfolio, which is a response to the increasing price competition from challenger brands.
Australia’s 2014 General Insurance Review
reports that insurance profits of surveyed insurers climbed 8.3% during the year, up from $4.580bn in 2013, due to increased premiums, benign catastrophic claims, and strong investment returns in equity and alternative asset markets. Gross written premiums increased by 3% to $32.6bn.
The report stated that insurers used the quieter weather event period to continue to focus on expense reduction, which resulted in a reduced expense ratio of 26.1%, compared to 26.4% last year.