How InsurTech is reshaping insurance

Nine in ten insurance executives believe that their business is at risk to FinTech companies.


In the insurance world, the sub-sector addressing existing challenges with new technologies is called "InsurTech", and it is making rapid inroads into the territory of traditional insurance providers.
The most common threats include pressure on margins and loss of market share, but even though insurers acknowledge the pending disruption, only 43% admit to putting FinTech at the heart of their corporate strategy. To gain a clear industry picture, PwC conducted a survey of more than 500 key players around the world; 79 of them represent major insurance companies. (www.pwc.com/fintechreport) Our findings reveal that the threat of FinTech is well-grounded, as it is gaining significant momentum in an industry that is mainly driven by data insights.

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In this highly disruptive moment, insurers must have an in-depth overview of the industry, understand how technology is changing their sector and know where potential opportunities lie. To navigate the changing rapids of FinTech successfully, companies must understand how to leverage emerging technology to comprehend risk insights, enable business with sophisticated operational capabilities and utilise new approaches to underwriting and predicting loss. This expert view of the industry is key to anticipate how new technologies will drive insurance disruption—in fact, most industry improvements are being driven by innovation in other ecosystems, such as Internet of Things (IoT), drones, advanced driver assistance systems (ADAS), connected health, etc.

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From the insurers' perspective, the most significant gain expected from InsurTech is cost reduction. A move towards cloud-based platforms means not only lower up-front costs, but also smaller ongoing infrastructure spending. Only this innovation, when compared to mainframe-based technologies, could reduce costs up to tenfold. Other areas of opportunity relate to using technology and data to enhance operations and business functions. For example, some insurers use AI technology to enhance internal operations. This has improved their efficiency and automated processes around customer-facing roles, underwriting and claims processing.

Insurers could gain even more from InsurTech if they were more responsive to emerging, but yet less explored, innovation waves. Non-insurance specific trends, such as self-driving cars, robotics and medical advances, among others, have the potential to disrupt the market earlier than many expect.

For example, the blockchain is a highly relevant technology that continues to elude incumbents - almost a third of insurance survey participants declares they are not familiar with this technology at all. Meanwhile, the blockchain could become an industry game-changer; there are already proofs-of-concept in the areas of shared economies and on-demand economies, auto-settlement claims and frictionless capital flows across traditional ecosystem players (agents, brokers, service providers, etc.).

At an aggregate level, the insurance sector has not yet worked out a consistent approach to disruption. Now is the time for executives to think forward, put innovation at the heart of their strategies and define to what extent they want to participate in the InsurTech ecosystem. The sooner the strategy is redefined to refocus it on InsurTech, the greater the chance an insurer has to seize InsurTech-related opportunities. Those who manage to harness the InsurTech disruption will become market frontrunners.

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Dariush Yazdani

Grégory Weber

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