No time to lose: How to get ahead in the race to capitalise on insurtech’s potential
By Stephen O’Hearn, Global Insurance Leader at PwC Germany
Greater ambition and faster embrace of insurtech are enabling market leaders to pull ahead on the innovation agenda. The followers need to move quickly if they’re going to capitalise on insurtech potential and avoid being marginalised.
In past blogs, I’ve charted the shift in perception as insurers come to recognise insurtech’s innovative possibilities rather than seeing it as a disruptive threat; and more recently how insurtech is opening doors into adjacent ecosystems in areas such as agriculture, automotive and health.
As we highlight in a new PwC report, Crossing the lines: How fintech is propelling FS and TMT firms out of their lanes, the race is now on to capitalise on insurtech’s bottom line potential. A solid proportion of the 248 financial services (FS) firms that took part (includes 54 insurers) have moved quickly to build insurtech innovations into their products, services and customer experience. This includes a strong cohort of farsighted insurers. However, most of the insurers and other FS organisations in our survey are still stuck in the development and pilot stages, and have yet to bring fintech-enabled capabilities to market or see a return on investment.
Risk of falling behind
Equally revealing is insurers’ ranking of the emerging technologies they believe will have a transformational impact on the way services are delivered over the next two years.
Artificial intelligence (AI) is out in front. If we look at the key areas of underwriting and claims, AI offers opportunities to automate and speed up activities 100x, and even 1000x in some cases, rather than just make them 10% or 20% faster. That’s real transformation.
Second in the impact rankings is big data. Data has always been a massive differentiator in the insurance sector. Having the best data and using it in the smartest way is the hallmark of a market leader. The current proliferation of digital information and potential to harness sensor data feeds to minimise the risk of loss are game changers for underwriting, while creating openings in adjacent areas.
In relation to sensors, while the power of data is fully recognised, Internet of Things (IoT) connectivity is surprisingly low down insurers’ list. Sure, IoT may be more of an opportunity for non-life than life insurers at this stage, which may partly explain the low rating. Nonetheless, failure to grasp the potential of this and other tech developments or delays in bringing innovations to market could leave gaps for faster moving competitors to exploit, both from within the insurance industry and entrants from outside.
The threat from outside
How then are the new entrants looking to gain an edge? Our survey provides revealing insights into their intentions by asking 260 technology, media and telecommunications (TMT) firms what they see as the main opportunities within the FS market and how they plan to capitalise.
What’s clear is that many TMT firms are not only pulling ahead in the application of tech to the world of finance, but also their ambitions for the future. In the insurance world, this centres on distribution and enhancing customer relationships. Insurers and other FS organisations tend to focus on applying tech to improve the ease and speed of service, though this could be seen as mere table stakes in today’s marketplace. TMT firms have set the bar much higher by harnessing tech to personalise the services they offer, increase access and deliver a superior experience.
Tech-enabled personalisation is having an especially disruptive impact on the insurance market, encouraging insurers to simplify products. We've built too much product complexity over the last 20 years. The new goal is customisation of the experience not the products. And as deployment of the innovations reshaping the marketplace accelerates, the divide between leaders and followers could quickly become unbridgeable.
Taking the lead
How then can your business keep pace? The report outlines a number of key priorities ranging from workforce transformation and greater product simplification to partnership with TMT firms within a more collaborative operating model. Yet what most marks out the front-runners in our survey is leadership from the top. Businesses that have a c-suite executive directing digital development and innovation are more likely to be ‘very confident’ about insurtech opportunities and wider tech-led revenue growth than those that don’t.
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