The global consulting firm everis, together with NTT DATA, published the third edition of InsurTech Outlook 2019, where the technological landscape within the insurance market and its evolution during the last years is analysed. Furthermore, this report shows the role from insurers, investors and technological companies in the industry, illustrating the trends that are redefining the insurance market.
This 2019 issue offers an exhaustive vision regarding Insurtech’s real impact, based on an in depth analysis developed from the information available at Next platform (an NTT DATA asset that provides one of the biggest repositories with start-ups information worldwide) and complemented with different public and private sources of information. Although the study started from 5.000 start-ups analysed, the scope ended on 1.900 by using an exhaustive segmentation process.
Alongside, and with the aim of increasing the report’s reach, several surveys were conducted to executives from 43 insurance companies present in more than 10 countries across Europe, Asia Pacific and Latin America. These interviews provide first-hand information about global and local leaders in every insurance business line, allowing the comparison between the trends and investment analysis and the actions delivered by insurers to approach the Insurtech ecosystem challenges.
In the study several NTT DATA and everis’ experts have collaborated to enrich the results with a local perspective.
Business sector transformation in a world of hyper-accelerated disruption
Among the main conclusions, the report highlights the relevance of exponential technologies that are redefining the insurance sector value chain.
In this context, start-ups are playing a fundamental role in the development of solutions to answer the sector’s needs: greater client loyalty, new income sources and more operational efficiency are some benefits that make Insurtech start-ups attractive partners for insurers.
During the period 2016-2018, Insurtech ecosystem has received a total investment of 11.2 billion dollars, more than double that the one obtained between 2010 and 2015 (5.5 bn dollars). While the majority of insurer’s investments in Insurtech companies are set in more mature firms, a wide group of surveyed executives show their preference for investing at the early stages, excepting Latin American companies where they prefer more advanced phases.
Cloud, Big Data and IA, the most relevant technologies in the following years
According to technologies, the main investment is focused on start-ups based on Cloud and mobile applications. Compared to the investment in other technologies, these solutions facilitate value creation and attract investors interested in new business models.
Insurtech investment ranking by technology between 2016 and 2018 focuses in start-ups based on Cloud and Apps, first; followed by Big Data & Backend, Artificial Intelligence, Internet of Things and Blockchain.
Nonetheless, the report indicates that the evolution between 2010-2015 and 2016-2018 shows that AI based start-ups had the highest growth: +665% among both periods. These investments reveal the need to process and learn from data in order to build a personalised offer, attract and retain clients and achieve more efficient process across all business lines.
Mobile applications had great relevance and is expected that its impact will increase during the following years due to its orientation to personalization and to aggregation and comparative platforms. On the other hand, the e-commerce area is more focused in cybersecurity as the most used technological tool due to the increase in risk perception.
Competition or collaboration?
Insurance companies are collaborating with Insurtechs to face these technological challenges and take advantage of new opportunities. However, the vision is not just positive, because 9 out of 10 insurers consider Insurtech activity as a risk for their current business. Start-ups, on their behalf, value the chance of getting close to traditional insurers: access to their client databases and solving regulatory affairs, key factor to scale their businesses.
Technological companies – Amazon, Alibaba, Apple, Baidu, Facebook, Google – look to innovate in the insurance sector by collaborating with different disruptive start-ups to enter the health or small and mid-caps insurance market. Their objective is to innovate in the conceptualization, design and commercialization of insurance products adapted to new living habits (connected home, self-driving car…) and to connect them through their platforms, transforming the insurance distribution model. According to the survey, the main technological companies will have great relevance in the insurance market in the following years. Indeed, Google and Amazon will have the biggest impact in Technology and Distribution, respectively.
Future challenges: towards an open innovation model
New technologies are redefining the business environment and creating new challenges for CEOs that look to succeed in a world of hyper-accelerated disruption. The answer is not just based on M&A or new technology implementation. The biggest challenge is the global business transformation, an inside doors change, where exponential leaders look for disruption to generate growth and increase competitiveness.
Bruno Abril, global partner; Head of Insurance at everis, has commented: “big insurance companies confirm that Insurtech value chain fragmentation is a key point in their strategic agenda. This will enhance the necessary evolution towards an open innovation model in order to maintain their relevance in the market”.
Download the report here.