Nearly a quarter of insurance CIOs believe that future competition will primarily come from technology providers and startups.
Insurance sector CIOs need to expand their market insight concerning the innovation and disruption potential of insurance technology startups (insuretechs) to complement their digital insurance strategies, reports Gartner.
Gartner research shows 64 per cent of the world's 25 largest insurance companies have already invested directly or indirectly via their venture capital arms in insurtech startups.
Gartner predicts that by the end of 2018, 80 per cent of life and property & casualty (P&C) insurers worldwide will partner with or acquire insuretechs to secure their competitive positions.
Juergen Weiss, managing vice president at Gartner, says insuretechs can stimulate or accelerate innovation among incumbent industry players and complement existing digital insurance strategies.
"Gartner has seen a growing interest among insurance business and IT leaders in collaborating with insuretechs or making them part of their overall innovation policies, but the research has also found that most insurance CIOs are not familiar with these companies or their value propositions," says Weiss, who spoke at the Gartner ITxpo this week in the Gold Coast.
“We advise CIOs to identify areas where insuretechs could complement their digital insurance strategies, and evaluate potential collaboration or investments."
Not all of them will survive. Insurance CIOs will need to develop a fail-fast approach and an exit plan that secures intellectual property and critical resources."
Weiss also advises insurance CIOs to attend at least one insuretech conference to observe and better understand their value proposition and technologies “especially those that are substitutes and whose growth will hurt you.”
Gartner research shows nearly a quarter of insurance CIOs believe that future competition will primarily come from technology providers and startups.
It says some insuretechs have the potential to signicantly disrupt traditional insurance value chains because, among others, they offer a superior customer experience or better address customer needs and increase market transparency and offer customers the option to compare product and service offerings from different insurance providers. They also offer new business models such as freemium and peer-to-peer (P2P) insurance that either complement or compete with current insurers’ offerings.
Gartner lists six main options for insurers in order to capitalise on the opportunities that insuretechs provide:
1. Partner (for example, Axa partnering with BlaBlaCar for carsharing).
2. Acquire, that is, purchase the intellectual assets and hire all resources of an insurtech.
3. Purchase (like one would buy technology from an incumbent vendor such as SAP).
4. Invest (obtain a minority or majority share, either directly or indirectly, via a VC arm, such as Allianz's investment in Simplesurance).
5. Incubate (for example, let insuretechs compete to get into a startup accelerator; mentor them; and give them a space to work and exchange ideas).
6. Insure the operations or assets of insuretechs.
But Gartner says insurance CIOs who are planning to partner with these startups need to be aware of the risks.
"Not all of them will survive," says Weiss. "Insurance CIOs will need to develop a fail-fast approach and an exit plan that secures intellectual property and critical resources."
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