The number of people willing to buy an insurance product directly from big tech firms such as Google and Amazon has risen sharply in recent years.
According to Capgemini’s World insurance report, almost one-third (30%) of people globally would buy an insurance product from a large tech firm rather than a traditional insurer because of poor customer experiences at the latter.
Small tech firms creating apps for the insurance sector, known as insurtechs, are paving the way for tech giants like Amazon to compete with traditional insurers.
Almost 30% of consumers said they would consider buying at least one insurance product from a large tech firm, compared with 18% who said so in the same survey in 2015.
Anirban Bose, global head of financial services at Capgemini, said firms in the insurance sector must keep a close eye on the emerging competition. “Insurers, risk assessors by nature, must urgently turn their gaze inwards and consider the competitive risks within their own industry in order to evolve and survive,” he said.
According to Bose, if insurers do examine the competition, they will see the need to invest in technology to harness data to improve their offerings. “The use of data and being able to offer a truly digital customer experience are both critical for the insurer of the future – something big tech firms like Amazon and Google excel at,” he said. “The threat from such entrants is more real than the insurance industry might want to admit.”
The sector is already being disrupted by smaller tech firms supporting customers, particularly young and tech-savvy ones who want personalised insurance products.
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This has become known as the insurtech sector, which is the insurance industry version of retail banking’s fintech. Such 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 serve customers better at lower cost. They also use data to personalise services.
Customer acceptance of these new models is paving the way for the big tech players to move into the insurance sector, utilising their tech expertise and financial clout.
The insurance sector is not new to disruption – arguably, it pioneered disruptive technology. Price comparison companies were the early tech pioneers in insurance, and have largely replaced traditional insurance brokers.