The rapid growth of the insurtech sector has ushered in a new era of collaboration between challengers and incumbent insurers, according to the inaugural World Insurtech Report published by Capgemini and Efma.
The report, which polled 140 traditional insurance and insurtech executives across 33 global markets, found that most respondents believe insurtechs will be a major catalyst to redefine the customer experience, deliver widespread efficiencies, and create new business models.
The industry also expects disruption and new competition to come from giant technology companies such as Amazon and Google, as well manufacturers. This comes in the wake of an insurtech sector that saw investment increase at a CAGR of 36.5% between 2014 and 2017.
Over two-thirds (67.1%) of incumbent insurers believe that insurtechs could ‘redefine customer experience’, while 91.7% of insurtech leaders agreed. Meanwhile, 36.7% of incumbents said they could ‘bring in new business models’ and 35.4% felt that insurtechs would ‘enhance incumbent insurers’ capabilities. Insurtech respondents agreed at 58.3% and 33.3% respectively.
Almost 96% of traditional insurers said they were open to collaborating with insurtech firms in some way, with most favouring a partnership (77.9%) or Solution-as-a-Service (SaaS) approaches (75.8%). Only 32.6% said that they are considering acquiring an insurtech firm.
With regard to the benefits of collaboration, 77.2% identified ‘improved ability to enhance customer experience’, 59.5% ‘faster time to market’, 46.8% ‘new digital capabilities,’ and 40.5% ‘competitive advantage over peers.’ Insurtech categories that are being considered for short-to-medium partnerships include data specialists (according to 62% of incumbents), claims management solution providers (51.9%), front-office solution providers (51.9%), and technology specialists (55.7%).
“It’s clear that insurers and insurtechs see collaboration as the key to success in the evolving industry ecosystem, with reimagined customer experience at its heart,” said Anirban Bose, CEO of Capgemini’s Financial Services Strategic Business Unit and member of the group’s executive board. “Finding the right chemistry between collaborators to create a sustainable, agile position in the industry is the key to determining who will be future industry leaders.”
Alongside the rise of insurtechs, traditional insurers believe that a new wave of competition is likely to come from a combination of manufacturers and major tech firms. Among incumbents, 81% identified Amazon as the primary source of potential competition, while 59.5% pointed to other tech giants (such as Alibaba) and manufacturers.
“New competition requires incumbent insurers to be agile and innovative,” said Vincent Bastid, secretary-general of Efma. “Collaboration with the right insurtech partner will facilitate the journey to attain the right position as industry disruption continues.”