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A third of people worldwide already use insurance startups that are challenging the traditional players through the use of digital platforms, but legacy suppliers are still more trusted.
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According to the World Insurance Report 2017 from Capgemini and banking and insurance association Efma, which surveyed 8,000 people globally, 31% of people receive insurance products through the challengers, known as insurtechs, but while 39% trust traditional suppliers, only 26% trust the new arrivals.
The insurtech movement, like fintech in the banking sector, is disrupting traditional models. These companies use digital platforms to provide easy-to-use mobile services and harness technology such as automation software and artificial intelligence to enable them to better serve customers at a lower cost. They also make use of data to personalise services.
As well as gaining trust, other challenges to insurtechs include reassuring customers about security and fraud protection, improving personal interaction and making people more aware of their brands. Traditional suppliers were seen as being stronger in these areas by 46%, 42% and 44% respectively.
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When it comes to digital services, traditional insurers are held back by legacy IT systems, which are expensive and make it difficult to quickly introduce new services.
As a result, collaboration between traditional players and insurtechs is likely. Some 75% of insurers stated that insurtech capabilities would help them serve customers, with over half citing personalising products as an example.
“Increasingly, partnerships are being viewed as a welcome development in the ongoing effort to address the insurtech movement,” said Jack Dugan, head of insurance at Capgemini. “Insurtechs can help incumbents overcome roadblocks such as ageing systems and paper-based processes. Meanwhile, incumbents can help insurtechs face newcomer challenges, like high customer acquisition costs and a lack of risk management experience.”
Efma’s secretary general, Vincent Bastid, said: “The insurance industry serves the masses and must adapt to the new terms of engagement. Collaborating with insurtechs is an optimal way of incubating and accelerating digital innovation.”
Technology has already transformed the way insurance policies are purchased, with services such as Compare The Market, Go Compare, Confused.com and Money Supermarket becoming the go-to places for insurance.