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Almost half (48%) of insurers fear that up to 20% of their business could be lost to standalone FinTech companies within the next five yearsAnnual investments in InsurTech start-ups have increased fivefold over the past three years, with cumulative funding reaching USD 3.4 billion since 2010*
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Over two-thirds (68%) of insurance companies say they have taken concrete steps to address the challenges and opportunities presented by FinTech
InsurTech start-up companies are accessing and analysing data in new ways and in record time, not hindered by legacy technology systems as their incumbent competitors are. PwC surveyed management from 79 insurance and start-up companies across the globe to gauge how the industry is responding to this opportunity to transform the market.
Stephen O’Hearn, global insurance leader at PwC, commented: “Insurers need to encourage a culture of innovation and creativity within their organisations to ensure that the progress being made is not squandered.
“There is a risk of missing an opportunity to deliver customers a similar experience to one they already receive from retail and technology companies. One size simply does not fit all in insurance anymore and, by working alongside InsurTech companies, companies can begin to reposition themselves at the cutting edge of customer interaction.
“InsurTech will be a game changer for those who choose to embrace it. Insurers have unrivalled access to consumer data and using cutting edge technology to thoroughly analyse it could result in significant benefits for both the company and the man on the street.
“Only by acting today and embracing both the challenges and opportunities presented by InsurTech will the industry be ready to tackle tomorrow’s challenges. Those who are savvy enough to address the ongoing disruption sooner rather than later will reap the benefits and emerge as market leaders.”
PwC highlights four steps insurance companies can take to make the most of the InsurTech revolution:
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Exploration – savvy incumbents are already monitoring new trends and innovations and establishing a presence in innovation hotspots such as Silicon Valley, Singapore and London
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Strategic partnerships – partnerships with start-up companies and building pilot solutions will become increasingly popular amongst insurers who wish to see first-hand what creativity can offer them
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InsurTech involvement – start-up incubators and strategic acquisitions are efficient ways for insurers to address specific problems, which otherwise would take far longer to tackle
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New product development – by listening to, and interacting with, start-ups incumbent insurance companies will discover current and emerging risks and coverage needs – they should focus on adapting and refining their product portfolios in response
Threats and opportunities
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Pressure on margins (73%) and loss of market share (69%) are highlighted by insurance executives as the top threats FinTech poses to the industry
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Cost reduction (81%) and differentiation (65%) are highlighted by insurers as the most significant potential gains from FinTech
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Incumbent insurers see IT security as the biggest barrier to working alongside start-up companies. The start-ups themselves highlight ‘difference in management and culture’ as the biggest challenge in the relationship
Jonathan Howe, UK insurance leader at PwC, commented: “The differences between start-ups and incumbents should be embraced as both are vital to the future of the industry. If the long-term mindset and experience of insurance companies can successfully be partnered with the creativity and agility of start-up companies, the industry as a whole will make progress in solving problems and bringing truly innovative products to market.”
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