InsurTech is transformative, but faces its own challenges
Article Synopsis :
Insurtech firms may offer advantages, but also face challenges says the World Insurtech Report 2018 from Capgemini and Efma.
Specialism allows firms to adapt to the market dynamics, but it is agility and ability to integrate which both traditional insurers and the tech firms consider the most important asset.
Agility is seen as one of the three key attributes by more than 80% of traditional insurance companies.
Though the ability to integrate into a given ecosystem was the most important attribute of distributors and enablers, this is not the same for full carriers.
Almost two thirds (60%) believe enablers must build sustainable competitive advantage. However, have said the same of distributors, who have a limited chance of differentiating their offerings.
Customer experience has been an important component of the success of insurtech companies. Of those surveyed, 65% in traditional companies and 90% in insurtech firms claimed the new technology was redefining insurance customers’ experience and that insure tech will enhance the traditional firms’ capabilities.
Where insurtech face a challenge – and where the traditional firms remain successful – is in trust and brand recognition. These are not built overnight and insurtech firms must prove their reliability over a longer period before consumers will view them as trustworthy.
Nevertheless, insurtech can navigate the complexities of regulatory environments quicker and easier than monolithic traditional businesses – provided they have enough capital. Insurtech firms rely heavily on funding.
There have been a number of large funding rounds from hedge funds and other investment partners, but there is considerable scope for collaboration between traditional insurers and insurtech firms for the development of mutually beneficial relationships.
The paper goes into quite some depth as to how these collaborations might develop and how to identify insurtechs that offer the possibility of a long and happy marriage rather than a unsatisfactory one night stand.
Though insurtechs deliver disruptive technology, at times posing a competitive threat, collaboration is the new model to be aspired to, as it will strengthen both traditional insurers as well as the new entrants, it will expand the insurance market into new markets, new consumers with different products via new distribution channels.
The development of such an ecosystem will itself create a virtuous circle that provides all players with the key attributes to be successful in this new insurance world.
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Digital Insurer's CommentsThe future of insurance relies not solely on insurtech, but on how traditional insurers – those with the consumer trust, brand awareness and capital – can harness it.
Collaboration is the watchword for this report which says that both sides of the tech divide can be stronger, in a bigger market, by working together.
This offers traditional insurers the comfort that the new upstart isn’t only out to eat its lunch, but is prepared to share if only they will let it.
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