Insurtech is coming. Will it impact your business?
Only 2% percent of the world is insured which means there is so much potential in the insurance market. It is estimated that underinsured property risk counts toward USD 221 billion per year. So, it seems that there are still chances for insurance companies to gain market share and survive. Will the insurers be able to cope with upcoming changes in the market? Will InsurTech startups, a new Generation of clients and other technological advances be a threat to the market or rather, will they give insurance companies the tools to thrive? Many global trends are completely unpredictable, but can still influence entire industries. Can they be controlled? If so, how? All can depend on Insurers’ ability to adapt and change with the times.
Insurance products and the way they are sold are constantly changing. Insurers must react quickly to changes that take place around them as well as clients’ expectations.
Recent innovations are primarily associated with a large number of technological startups – the so-called Insurtech (Peer 2 Peer insurance and lending, aggregators, sharing economy, new digital tools) can have a big impact on the insurance sector.
On one hand, new Insurtech start-ups might push traditional insurance suppliers to create new insurance products. On the other, technological advances like “smart homes” decrease the severity of home insurance losses. What is more, over the coming years, driverless cars will change the complexity of the risk pool for motor insurance. In the long-term, these “smart cars” would potentially shrink the motor insurance market by reducing accidents and thus premiums.
Motor insurance represents 40% of insurance suppliers’ income. Autonomous cars aren’t necessarily good news for the sector’s future.
How to prepare for these disruptions and seize the opportunities that exist in the market.
This was the main theme of the 5th Innovation in Insurance conference, organized by Sollers Consulting and Guidewire Software in Warsaw.
Keith Stonell talked about the Millenial generation, the effects that they will have on the market and what insurance companies can do to meet their needs.
We were also reminded by Michał Trochimczuk that only 2% of the world’s economy is insured:
This signifies massive potential for those insurers who can take advantage of it. – said, Michał Trochimczuk, Managing Partner at Sollers Consulting – The global underinsurance for property risks is estimated at USD 221 billion per year.
The question was: how to reach customers and with what kind of products?
Changes in the market will appear faster than ever; the ability to adapt and change will become more important to insurance companies in order to keep abreast of the competition.
To do this, insurers require the flexibility and agility provided by modern core systems for customer policy and claims administration. This will enable them to enter new markets and create products faster than before. It’s worth pointing out that new alliances and partnerships can carve out market space, even in mature markets.
“A big part of the answer is rethinking relationships with potential business partners like Insurtech Start-ups might be worthwhile”, summarized Michał Trochimczuk.
How do insurance companies respond to those changes?
Representatives of European insurers: Witold Jaworski, former CEO of Allianz and PZU (Poland), Dr. Rainer Sommer, COO at Generali Deutschland (Germany), Rafał Stankiewicz, Vice President of Management Board at Warta (Poland) and Hans Vranken, CEO at Touring Assurance (Belgium), facilitated by Marcin Pluta, Managing Partner at Sollers Consulting, discussed how they perceive the impact of Insurtech startups on their business. Will they cooperate with them and make use of their innovations?
They discussed the pros and cons of Insurtech Startups for the insurers. Surprisingly, 65% of guests gathered at the conference said that these companies will be threat for incumbent insurer, while panelists agreed that they should be treated as an opportunity.
“If we listen to the wake-up call that Fintech companies give us, we can treat them as the partners to provide better services.” – said Hans Vranken from Touring Assurance.
In the second voting poll, conference participants representing ten major insurers said that they are already starting to work with startups. This signifies that evolution in the market could be here sooner rather than later.
“We included telematics within our car insurance product. At some point, we decided to focus on the technological and cultural side of the transformation, so we improved our core system and DMS system. Now we have the innovative mindset and updated systems, we are ready to work with Fintech startups.” – said Hans Vranken.
Our panelists agreed that the biggest single impact on the insurance are new digital tools. The attendee voting agreed with this with a 31% majority.
“In a short-term perspective, new digital tools will influence the insurance business the most. But in the long perspective I agree with Hans the this will be new products” – commented Rafał Stankiewicz from Warta.
Some insurers have already started their preparations and have been sharing their stories during the conference – showing how IT support can enable innovation and transformation.
We have had a chance to listen to case studies from renowned European insurance companies such as: PZU (Poland), Touring Assurance (Belgium), Zurich Deutschland (Germany) and Zurich Insurance (Switzerland), who explained how opportunities for business transformation related to the introduction of new core systems. Agile methodology was a significant part of all the case studies as it helped in attaining success in various projects. Additionally, representatives of Touring Assurance and Sollers Consulting gave their presentation using real life examples which showed how to manage the scope and ensure the projects conclude successfully?
What should be done?
The conference was very fruitful in new ideas and solutions against upcoming global changes. We know that insurers will not be surprised and they have already started preparing. What is important is that there is still space to grow in some markets. To maximise potential, insurers need to listen to market needs and adjust to changes in order to meet the client’s expectations.
After all, in any fast-changing market, it’s typically better to play the role of the innovative disruptor rather than the company being disrupted. – said, Marcin Pluta, Managing Partner at Sollers Consulting – This is why the Innovation in Insurance conference came to be an important platform that gives possibility to exchange experiences among insurers from all over the world.
Fifth “Innovation in Insurance” Conference took place on 21st November, at the Intercontinental Hotel in Warsaw, Poland. It has been organized jointly by Sollers Consulting and Guidewire Software. Every year, the conference attracts more and more companies and representatives of the insurance market from all over the world. Total conference attendees resulted in 250 representatives of insurance companies from 10 countries.