Most property and casualty (P&C) and life insurers underestimate the disruption coming from future industry conditions and are not prepared to respond to new threats, according to a joint survey by Gartner and the Association for Cooperative Operations Research and Development (ACORD).
The survey, conducted in the second quarter of 2015 by Gartner and the non-profit insurance industry standards association, found that that most did not feel that any particular industry trend was reshaping the industry overall, but various ones had significant and moderate impact on the business.
Around 78 percent of those surveyed identified the need to have effective web or e-commerce strategies as the number one trend having the greatest impact on the industry.
Many companies have e-commerce as a leading initiative within their digital insurance strategies and are looking to increase their touch with customers through a variety of web strategies such as improved e-service sites, interactive websites and social media interactions.
The second industry trend projected to have the greatest impact on business strategy and vision was the greater need for cybersecurity practices and procedures, with 78 percent of respondents stating that it had a significant or moderate impact.
This may be creating a false sense of security that results in insurers investing in incremental business model adjustments, instead of the massive transformation that will be needed to meet the emerging business needs of the insurance market during the next five years and beyond.
This was followed by big data and analytics, reports Gartner.
Gartner also identified other industry-critical trends that were not viewed as having a significant impact overall. These include the Internet of Things (IoT), the need to create new sources of revenue, threats from non-traditional competitors and changing consumer lifestyles and behaviours.Read more: Are CIOs going back to the back office?: PwC
It says some respondents indicated these trends had no impact at all on their business strategy or vision.
"These results are risky given the disruption that the industry is experiencing and the speed of change expected over the next few years as digital insurance models continue to be implemented," says Kimberly Harris-Ferrante, vice president and distinguished analyst at Gartner. "As insurance leaders turn their attention to fulfilling digital insurance business models, they need to be keenly aware of the emerging issues around digital transactions and digital commerce.
“However, most are not looking at the growing threats from outside or transformational use of external data; for example, from IoT devices. This may be creating a false sense of security that results in insurers investing in incremental business model adjustments, instead of the massive transformation that will be needed to meet the emerging business needs of the insurance market during the next five years and beyond."
Additionally, few of the survey respondents identified these trends as completely reshaping the industry as a whole. Even when they felt that the trend had or would have an impact on their own business models, they did not typically view that trend as having the potential to reshape the business processes, products or the competitive landscape industryw-ide. The result is that their companies will be ill-prepared for new competition and new consumer requirements, notes Harris-Ferrante.Read more: Majority of cybersecurity experts say mobile payments data breaches will grow
The survey results also show that there is a fundamental misalignment between consumer attitudes toward emerging competitors and the perception of those competitors as risks among insurance leaders. Insurers overestimate the reliance that consumers have on agents, brokers and traditional channels, not realising the potential threat that new competitors represent and the power of these consumer-friendly and recognized brands.
The survey found that 53 percent of insurers believe that the most significant threat are the top five competitors in their local market.
"Having that point of view may be acceptable short-term, but awareness of the possible disruption long-term is imperative for survival. Insurers need to understand the disruption that could occur from new market entrants as they bring in new insurance offerings, represent more consumer-oriented brands, and that have higher loyalty overall," concludes Harris-Ferrante.
Send news tips and comments to firstname.lastname@example.orgRead more: Challenges arise as big data becomes the ‘new normal’
Follow Divina Paredes on Twitter: @divinap
Follow CIO New Zealand on Twitter:@cio_nzGartner reveals the 2016 CIO Agenda: Shift to platform thinking
Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.