Growing numbers of SMEs are turning to online insurance to protect their business.
According to a new report from PwC, 36 percent of small business owners will interact with their insurers online in the near term. By 2022, it will be 48 percent of all SMEs.
SMEs want to buy insurance online
PwC’s new Digital SME Insurance Survey of 2,100 small businesses from 14 countries indicates that SMEs are interested in purchasing online-based insurance solutions as the sector begins to digitally transform.
Recently founded companies are the most eager to interact with their insurers digitally with 48 percent of companies under a year old saying they want to purchase their insurance products online. For companies over ten years old, it’s 37 percent.
The findings show that insurers who are already digitally transforming have a significant advantage when seeking new customers.
As more new SMEs are formed, they’re increasingly likely to choose an insurer with an online customer-centric service. This gives insurers a chance to overhaul their business and emerge as a leader in the digital sector.
Tailoring insurance products
PwC said the opportunities for insurers present an “open door” to new products.
However, the company’s Global Insurance Leader, Steve O’Hearn, noted digital insurance initiatives face several potential roadblocks before they achieve success.
One of the biggest challenges will be in replacing current operating models with more agile digital-focused alternatives.
“Insurers must have the capabilities to understand their customers and have technical solutions allowing them to rapidly evolve and adapt solutions as the market changes,” said O’Hearn. “They also should look at an emerging generation of startups not just as customers but as potential partners in providing new technology solutions and value-added services, creating more responsive, and targeted solutions.”
Cybersecurity Insurance Lags
The study also found uptake of cybersecurity insurance is very low, with just 16 percent of firms having active cover. Over 46 percent of the respondents said cybersecurity insurance could be applicable to their business.
U.K. insurtech jobs booming
Jobs in insurtech are increasing 22 times faster than the rest of the U.K. market, according to a report from Accenture. And Brexit isn’t going to slow things down.
The sector saw significant investment levels, says the report, hitting US$250 million in just the first six months of 2017. This was twice the level of investment in insurtech in the rest of the European Union.
Accenture predicts this level of growth is unlikely to be stalled by Brexit. The number of insurtech jobs grew by 22 percent per month over the course of 2017. This is way above the employment growth rate of just one percent for the whole U.K. economy, as reported by the analytics company Joblift.
Most In Demand Insurtech Roles
Accenture says the most in-demand roles in insurtech in the U.K. market are:
- web developers
- data analysts
Interestingly, vacancies in traditional insurance have seen a decline, despite that seven out of every 10 insurance jobs is within the ‘traditional’ sector. Frankfurt, Europe’s other main insurance (and insurtech) hub, has seen similar patterns, according to Insurance Business magazine.
These patterns are a clear sign of how the insurance sector is changing as a result of insurtech startup disruption.
Nshish Nangla, senior director of insurtech and digital transformation at Synechron, says: “The latest technology trends will definitely change how the market works and how people interact with each other, as well as how things are presented in the market. There’s going to be a lot of change around customer engagement and how insurers communicate with their customers, and that might lead to disintermediation.”
9 out of 10 digital transformation projects will fail
Digital transformation is now a widely accepted term in enterprises across every industry. While leaders have embraced the idea, a report has found businesses are struggling to implement transformation strategies, with just one in ten projects successful.
The survey from Couchbase found that 90 percent of digital transformation projects have either fallen below planning expectations, delivered only minor improvements or altogether failed. The NoSQL database vendor surveyed 450 CIOs, CTOs and digital leaders at companies with over 1,000 employees in the U.S., U.K., France and Germany.
According to the survey respondents, problems usually occur due to a lack of business agility. The scope, scale and requirements of digital projects can shift significantly during their implementation. When these projects are completed in the context of a large enterprise, they are limited by existing processes that don’t possess the same flexibility.
This has created a disparity between businesses in traditional industries and start-ups focused on tech. Start-ups tend to be implicitly focused on the aims of transformation: improved productivity and an extended customer experience. Larger businesses stand to benefit the most from digital transformation but often find themselves constrained by the nature of their industry.
Specific challenges cited by the survey respondents included a lack of preparation within the organisation and a restrictive reliance on legacy technology. A combination of these problems means most companies find themselves unable to implement their digital transformation strategies, even if the original plan is sound.
This matters because an overwhelming majority of the business leaders surveyed agreed a successful digital transformation will be critical to the future success of their company. A full 73 percent said their industry is being disrupted by new technology, with a further 16 percent saying they expect a transition to be just a matter of time.
The consequences for firms that don’t adapt could be severe. Couchbase previously reported that 54 percent of companies expect to fail if they miss the impending digital transformation revolution. Companies are desperately trying to avoid being made irrelevant by the next Amazon or Uber. However, with only a small minority of digital projects succeeding, the CIOs and CTOs responsible for their implementation are becoming increasingly concerned.
Couchbase warned that enterprises are facing a “stark choice” as they move to put their transformation plans into motion. Companies need to balance the maintenance of their legacy systems with the introduction of modern customer-first alternatives. As entire industries migrate to digital approaches, studying success stories will be vital to installing satisfactory implementations.
Insurance companies increasingly using ‘InsurTech’ to set rates
The latest World Insurance Report (WIR) finds a wave of new digital technology is confronting most insurance sectors. While disruptive, the InsurTech movement is forcing insurance companies to rethink their business model and customer relationships.
Basically, the InsurTech movement presents more technology-related opportunities than ever seen before, highlighting the need for traditional insurers to design a balanced strategy which ensures a return on their investments in innovation without a loss of focus.
The WIR report, published last week by consulting giant Capgemini and non-profit industry body Efma, found that nearly one-third (31 percent) of customers relied on InsurTech solutions, either independently or in combination with an established insurance company.
What is InsurTech?
Insurance is one of the oldest businesses in the world. Generally, insurance companies use actuarial tables to assign policy seekers to a risk category. A particular group is then lumped together to ensure that, overall, the policies are profitable for the company. In this method, some people end up paying more than they should based on the level of data used to group people.
This is where InsurTech comes into the picture. An offshoot of the financial technology (fintech) sector, it’s a rapidly evolving movement aimed at simplifying and improving the efficiency of insurance, making it more personalized.
InsurTech companies are utilizing a number of emerging technologies such as artificial intelligence (AI) and blockchain, along with the technology behind driverless cars, drones, and voice-recognition software. They act as catalysts for this InsurTech revolution and are driving a myriad of innovations in digitization, data and analytics, and insurance-as-a-utility.
InsurTech startups have introduced a vast array of products, from a system warning ships of nearby pirates to an app offering to buy sleepy drivers a coffee on the highway, all in an effort to save on the cost of insurance claims. As a result of this, the market has become highly competitive.
Continued reliability on technology
According to the WIR report, over 100 senior executives from various insurance firms in 15 markets were interviewed, and a strong majority (75 percent) said that developing InsurTech capabilities would help them better meet customers’ evolving demands. More than half (52.7 percent) agreed that having InsurTech capabilities would help them quickly design personalized products.
According to the report, AI, blockchain, and drones were among the driving factors of the InsurTech revolution. “The continued reliance of consumers on digital technologies that support mobile apps, social networking, on-demand services and the like makes it clear that the mass market has entered a new phase,” Vincent Bastid, secretary general at Efma, said in a press statement Wednesday.
“The insurance industry serves the masses and must adapt to the new terms of engagement. Collaborating with InsurTechs is an optimal way of incubating and accelerating digital innovation.”
The risks in using InsurTech methods
Interestingly, there has been some backlash, despite the rapid growth of InsurTech in the U.K. and Europe. The biggest growth was seen in Britain, where despite the vote to leave the European Union, it hit $279 million in the six months to end-June, from $9 million a year earlier, an analysis by Accenture of data from CB Insights showed.
In the rest of Europe, investments in InsurTech grew from $97 million last year to $134 million. Some insurers are even forming partnerships with InsurTech firms.
In Britain, InsurTech firms put their focus on social media to assess the probability of claims, fueling concerns about data security. Last year, Admiral, an automobile insurance company in Britain, had to abandon its plans to take data from Facebook to set insurance premiums following objections from the social media company.
The Federation of German Consumer Organisations (VZBV), also sees big risks from using big data in fixing insurance rates, fearing the trend will end up assigning risk based on social media norms, something many people see as discrimination. Needless to say, insurance companies are being told to consider the legal implications of using social media data.
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