Insurance companies in Europe are under threat from companies outside their sector as they fail to keep up with digital developments.
According to Forrester Research's report Trends 2014: European Digital Insurance, companies outside Europe are ahead of companies in the continent. It also said companies in the manufacturing, utility and telco spaces, and start-ups, could take business from traditional insurers.
To catch up, insurance companies should open digital labs, run hackathons, tap into internal and external talent, and partner digital firms, said the report.
"The digital race is on. Europe's digital insurance execs should respond by leading the battle against digital inertia," said Forrester analyst Oliwia Berdak. "Using open innovation is part of a journey to develop products and services that will fundamentally change the nature of insurance, moving away from a model based on compensation to one focused on prevention."
Research from Forrester found: direct insurance channels are gaining momentum with a quarter of online European adults purchase through insurance comparison websites; online insurance sales are catching up with face-to-face sales; and digital budgets are rising across industries.
“Insurance companies must not fall behind,” said Forrester.
The Forrester report said entrants are using digital technologies to compete for the insurance business of younger, technology-savvy customers. “Across Europe, usage-based insurance (UBI) from companies such as the UK’s Drive like a girl and insurethebox offers some drivers lower premiums in exchange for data on when and how they drive.
"In the Netherlands, Aegon subsidiary Kroodle claims to be the first insurer in the world that allows you to register via Facebook without the need for a policy number. Startups friendsurance.com in Germany and jFloat in the UK are trying to harness the power of social connectivity to grow peer-to peer insurance.”
Earlier this year, research from Accenture, of 6,000 consumers surveyed in 11 countries, revealed that almost a quarter of consumers would consider large internet companies, such as Google and Amazon, as possible insurance providers.
Accenture's research showed that 67% of 6,000 consumers surveyed in 11 countries would consider buying insurance from companies other than insurers. Some 23% cited online service providers as options.
A total of 43% said they would consider banks in their buying decision. Accenture said there could billions of pounds' worth of policies up for grabs globally, as 40% of consumers look to change providers.