More than half (59 percent) of insurance executives expect their industry peers to make acquisitions of digital insurance startups over the next three years to better position themselves in the digital world, according to new research by Accenture based on a survey of 141 insurers in 21 countries.
Telematics companies, insurance price comparison websites and analytics firms are the other most cited acquisition targets, mentioned by 47 percent, 43 percent and 38 percent of the executives surveyed, respectively. In fact, 43 percent of insurers surveyed have already acquired startups or are planning to do so in the near future to better capture digital opportunities.
The survey also reveals that three-quarters (75 percent) of insurers believe that digital will transform their industry within the next five years. On average, property and casualty (P&C) insurers expect their company’s digital initiatives to increase premium income by five percent over the next three years, and life insurers expect an increase of seven percent.
“Insurers realize that digital technology will transform the way they operate, and we believe that the industry is entering an unprecedented period of change, which will lead to totally new products, services and business models,” said John Cusano, senior managing director of Accenture’s global Insurance practice. “Select acquisitions can enable insurers to keep up with technological change, and are a sign that digital has become a board-level issue. Also, the growth insurers believe they can generate with digital initiatives is above industry average, and demonstrates that they are embracing digital as a key lever in their business strategies. Our experience shows that insurers that have a clear digital business strategy in place, as opposed to siloed initiatives, can achieve even higher growth.”
Significant investments planned, but insurers lack a clear digital strategy
P&C insurers are planning to spend an average of $47 million in digital investments over the next three years while life insurers plan to invest an average of $40 million.
However, the survey also reveals that 60 percent of insurers view their investments in digital as “exploratory,” as opposed to only 22 percent of respondents who believe that investments made by their organization are focused on driving truly disruptive innovations. When asked what hampers the execution of their digital strategy, “legacy systems” were the most cited response (42 percent), followed by a lack of the right skills (30 percent).
In addition, one-fifth (21 percent) of insurers don’t have a digital strategy in place, and one-third (32 percent) have implemented a digital strategy that is limited to sales and distribution or to customer interaction processes only. Less than half (47 percent) of respondents have a digital strategy in place that covers the entire value chain – from product creation to claims management, including sales and distribution, underwriting and customer relationship management.
“It’s critical that insurers should not fall into the trap of simply digitizing existing channels by creating upgraded, digital, or mobile-friendly versions of existing products and services,” said Jean-Francois Gasc, a managing director for Insurance within Accenture Strategy. “To unlock the full benefits of digital technologies, a change in mindset is required. Digital has already reshaped certain industries by shifting the power from businesses to consumers, placing consumers in the driver’s seat. This paradigm shift requires insurers to continually think from the customer’s perspective – that is, outside-in rather than from the company outward. Insurers need to fundamentally change their business models to become digital businesses that are truly customer-centric and that provide consumers with solutions rather than just products.”
Insurers open to new partnerships, including with Internet giants
Nearly three-quarters (72 percent) of insurers have formed or are planning to form new distribution partnerships, and, of the respondents intending to do so, more than two-thirds (69 percent) are considering partnering with banks, while almost half (44 percent) cite technology companies such as Google or Facebook as potential partners.
Also according to the survey, almost two-thirds (61 percent) of insurers are already offering, or are considering offering, non-insurance products and services such as home security, smart sensors and car maintenance.
“Digital technologies are dissolving the boundaries between industry sectors,” said Thomas Meyer, managing director of Accenture’s Insurance practice in Europe Africa and Latin America. “Certain insurers seem to understand that, to remain relevant in the digital world and avoid disintermediation, they must expand beyond their traditional business. They recognize the need to develop new types of partnerships and create new products and services – possibly outside the core insurance sector – to position themselves at the center of an extended ecosystem, allowing them to serve consumers beyond their insurance needs. The same disintermediation threat applies to banking, but insurers are more vulnerable because their customer interactions are much less frequent.”
Other key survey findings:
- Insurers have already made investments in digital areas including mobile communications and apps (68 percent), data mining and predictive modeling for fraud prevention (59 percent) and social media monitoring (54 percent).
- 29 percent of insurers expect premium growth to come from the expansion of their customer base through the use of digital channels.
- Only one-quarter (25 percent) of the executives surveyed claim to have a single view of the customer, a key element of almost any comprehensive digital strategy.
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