PwC concludes that insurers have changed their perception of InsurTech over the past year and, although concern remains around losing revenue to new entrants, there is a growing understanding and acceptance of the benefits that InsurTech businesses can bring to the established insurance industry.
Although over eight in ten (86%) of the insurers surveyed by PwC are concerned that revenue is at risk to InsurTech players, many are responding with over half (52%) also saying that innovation is at the heart of their strategy. The industry is waking up to both the challenges and the opportunities.
Artificial Intelligence (AI) and data analytics will drive better customer outcomes
94% of insurers say customer engagement and generating better risk insights are the most important innovation trends for them
Data analytics will be the main area for technological investment in the coming year, with 84% planning to invest in this area
63% of existing insurers are concerned about regulation and data privacy when working with startups
The insurance industry is asking itself how to better engage with customers and offer products people truly want and need. Partnering with, and learning from, InsurTech innovators will help insurers utilise data to better understand their customers and reach new segments of society, the report finds. A large driver behind this success will lie in transitioning to a more preventative model (helping customers avoid accidents) as well as providing on demand, pay-as-you-go policies.
The rise of data analytics will also allow insurers to focus on the opportunity brought about by the Internet of Things. Success with AI will free up the time of experienced professionals to work on more complex, judgement based decisions. This benefit should not be underestimated, as 87% of insurers say they have trouble hiring and retaining people with the right skillsets to innovate. Insurers will also look to acquire startups, partner with innovators and foster internal talent in order to attract the right people for the future.
Blockchain
81% of insurers say they are now familiar with blockchain technology
Insurers are beginning to expect a widespread adoption of blockchain technology across the industry and familiarity with the technology has improved since last year. But, while 68% of insurers plan to adopt blockchain as part of an in-production system by 2018, just 8% say they plan to invest in the coming year - suggesting that the pace of investment will need to increase dramatically to meet this target.
Blockchain can be used by insurers to:
Automate claims processes, delivering cost savings and bringing benefits to customers
Streamline data, giving better visibility and controls for underwriting
Aggregate and allocate catastrophe risks or losses, allowing for better monitoring, understanding and transparency of exposure and claims processes.
Commenting, Stephen O’Hearn, Global Insurance leader at PwC, said:
“Innovation in insurance, driven by the rise of InsurTech, has come a long way over the past year and there is no longer any question of whether companies will be involved with InsurTech. It’s a question of how they use it to their advantage and tie it into their overall business strategy.
“Insurance has always been an industry based on data and it is encouraging to see insurers investing heavily in a new wave of technology enabling them to use the data they have at their disposal in the best possible way for their customers and their own bottom line.
“Undoubtedly insurers still have their reservations, but it’s great to see increased investment in technology such as AI and blockchain and an interest in partnering with others in order to make the most of this excellent opportunity.”
Jonathan Howe, Global InsurTech leader at PwC, said that InsurTech truly has the potential to change the way people see insurance: “Companies are increasingly waking up to the potential InsurTech brings. If insurers can successfully use AI and data analytics to help their customers prevent claims happening in the first place, while at the same time delivering the responsive service that they expect from other industries, they will be able to transform how insurance is viewed by customers.
“It’s undeniable that existing insurers are still concerned about new entrants muscling in on their revenue, and regulation and corporate culture continues to be a barrier for some when working with innovators. But in the end, whether it is partnering with, or acquiring startups, or fostering innovation internally, insurers need to find a way to bring the benefits of InsurTech into the mainstream. Our survey suggests that this is now about to happen.”
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