Insurers unprepared for digital disruption
Most property & casualty insurers underestimate the disruption coming from future industry conditions and are not prepared to respond to new threats, according to a joint survey by technology research advisory company Gartner and the Association for Cooperative Operations Research and Development (ACORD).
The survey of international insurance leaders found that most did not feel that any particular industry trend was reshaping the industry overall, but various ones had significant and moderate impact on the business.
The number one trend having the greatest impact on the industry was the need to have effective web or e-commerce strategies, with 78% of those surveyed identifying that as a need.
The second industry trend projected to have the greatest impact on business strategy and vision was the greater need for cybersecurity practices and procedures, with 78% of respondents stating it had a significant or moderate impact.
This was followed by big data/analytics.
However, trends such as the Internet of Things (IoT), the need to create new sources of revenue, threats from non-traditional competitors and changing consumer lifestyles and behaviours were not viewed as having a significant impact overall.
These are trends which Gartner has identified as being critical to the industry, but some respondents admitted they had yet to have an impact on their business strategy or vision.
Gartner vice president and analyst, Kimberly Harris-Ferrante said the results had big implications.
“These results are risky given the disruption that the industry is experiencing and the speed of change expected over the next few years as digital models continue to be implemented,” she said.
“As insurance leaders turn their attention to fulfilling digital insurance business models, they need to be keenly aware of the emerging issues around digital transactions and digital commerce.
“However, most are not looking at the growing threats from outside or transformational use of external data; for example IoT devices.”
She went on: “This may be creating a false sense of security that results in insurers investing in incremental business model adjustments, instead of the massive transformation that will be needed to meet the emerging business needs of the insurance market during the next five years and beyond.”
Additionally, even when survey respondents felt the trend had or would have an impact on their own business models, they did not typically view that trend as having the potential to reshape the business processes, products or the competitive landscape of the industry as a whole.
The result, according to Gartner, was that their companies would be ill-prepared for new competition and new consumer requirements.
The other survey result of interest was the misalignment between consumer attitudes toward emerging competitors and the perception of those competitors as risks among insurance leaders.
Insurers were overestimating the reliance that consumers have on agents, brokers and traditional channels, and underestimating the potential threat of consumer-friendly and recognized brands.
The survey found 53% of insurers believe that their most significant threat are the top five competitors in their local market.
“Having that point of view may be acceptable short term,” Harris-Ferrante said, “But awareness of the possible disruption long term is imperative for survival.
“Insurers need to understand the disruption that could occur from new market entrants as they bring in new insurance offerings, represent more consumer-oriented brands, and that have higher loyalty overall.”