The warning comes from a KPMG survey which concludes there is an imperative for insurance CEOs to accelerate their digital transformation process and innovation efforts in order to remain competitive.
With the survey, business analysts KPMG polled over 100 global insurance CEOs and quizzed the executives about their plans and concerns for the near future. Given the speed along which the insurance market is transforming and the numerous forms of insurtech that are appearing, many insurance companies appear to be reacting relatively slowly.
In this context, the survey suggests that unless some insurance firms renew their strategies and pick up pace they risk being left behind. A significant threat comes from newer, more aggressive and digitally aligned start-ups.
This warning arises because the KPMG study found that less than 50 percent of insurance firms are planning to increase investment into innovation and emerging technologies over the next three years.
In some cases, this is due to a lack of recognition of the emergent digital threat; however, in many cases it is simply a product of insufficient time and insufficient resources to divert to newer technology. The resource issue is reflective of the challenges of the current low profit margin environment.
In this corner, InsurTech
What is the threat from insurtech challengers? Taking three examples and beginning with insurtech firm Swyfft, this company has developed a digital platform that claims to provide bindable homeowners’ insurance quotes to agents in five seconds.
In a second example, the U.S. insurance company Discovery Health has entered into a partnership with the health app Health Tap, developing a scheme to out its members into contact with a doctor in real-time.
In a third example, a report from Bain Capital notes that the most forward looking insurance companies are offering new services that take advantage of digital technology. Examples of such services include providing smoke, intrusion and leakage monitors for the home; offering telematic sensors for vehicles that can be used to reward good driving or trigger maintenance alerts; providing health diagnostics and advice; and expanding out into financial planning.
What do investors think?
Investors too are backing the digitally inclined insurance companies and there’s a risk that investment will shift from legacy firms to new players. For instance, the Financial Times has reported on ZhongAn Online Property & Casualty Insurance, a start-up that has priced its initial public offering at HK$59.70, raising $1.5 billion in readiness for its disruptive entry into the insurance sector.
These examples provide pertinent examples for established insurance companies and accentuate the message from the KPMG survey: it’s time to go digital.
