October 30, 2017
October 30, 2017
Contributor: Susan Moore
Startups present new opportunities for insurers to bolster innovation and digitalization strategies.
Last year saw one of China’s leading property insurance providers – China Pacific Insurance Co (CPIC) – make a strategic investment in San Francisco-based Metromile. By investing in the leading pay-per-mile car insurer in the US, CPIC gained access to a platform for developing innovative, usage-based insurance products and expanding the markets for them.
Almost $6 billion has been invested globally in insurance technology startups (insurtechs) in the last five years, particularly in digital customer engagement, mobile insurance management and analytics. In Australia, a new insurtech industry association was launched this month, dedicated to the advancement of insurance innovation and startups.
Collaborating with insurtechs, or at least evaluating them, has many potential benefits for insurance sector CIOs, but there are also downsides.
Speaking at Gartner Symposium/ITxpo in Australia this week, Juergen Weiss, managing vice president at Gartner, said the vast majority of insurance CIOs are still struggling to progress their digital strategies, despite digitalization being one of their top priorities. This is often due to a lack of agility caused by legacy IT systems, flat IT budgets and a lack of the right skills or the delivery models to support innovative business models.
“Insurance CIOs need to expand their market insight concerning the innovation and disruption potential of insurtechs,” Weiss said. “Start by identifying the areas where insurtechs could add value; then evaluate potential collaboration or investment opportunities.”
According to Gartner, insurers have six main options to capitalize on the opportunities that insurtechs provide.
Insurance sector CIOs planning to partner with insurtechs also need to be aware of the risks. Not all of them will survive. By the end of 2019, at least 25 % of current insurtechs will either be acquired by insurers to secure their competitive positions or simply go out of business, according to Gartner. However, insurtech failures may also present opportunities to complement insurance CIOs innovation and digitalization strategies. There are three ways your business could benefit:
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Recommended resources for Gartner clients*:
Why Most Insurtechs Will Fail and How Insurance CIOs Can Take Advantage of That by Juergen Weiss.
*Note that some documents may not be available to all Gartner clients.