In my last blog post, we looked at how the insurance industry has been investing in tech startups at a breakneck pace. This isn’t surprising, considering how the industry must position itself to compete in a world where digital reigns and customers demand innovative products and ease of use.
For many years, Accenture has been looking at the Digital Innovators in our industry and how they’re using digitalization to anticipate changes in the market and meet customer need. For example, we have been giving awards in a consortium with Schweizer Versicherung and industry associations to the most innovative insurance companies in Switzerland for more than 10 years. We’ve also looked at Digital Followers, those companies that may aspire to a strong digital presence, but lag in implementation or are focusing on improving current offerings rather than creating new value. The scramble to invest in edgy tech startups could very well leave these Digital Followers at a disadvantage, in spite of their current size or success.
A recent study by Forrester Research offers some dire predictions of how traditional insurance giants will fare in competition against the new wave of agile startups, in spite of heavy investments in digital teams across their organizations.
As the insurance sector continues to be disrupted by digital technology, startup firms will continue to pressure the current industry leaders, according to Forrester’s “Predictions 2015: Venture Investments Will Spur Digital Insurance Innovation.”
Although traditional insurers continue to dominate the landscape, there are some aggressive newcomers in the rear view mirror. Friendsurance (peer-to-peer insurance for the German market), Oscar (a U.S.-based healthcare insurer), Kroodle (the Dutch carrier Aegon’s Facebook-based insurance product), Metromile (pay-per-mile auto insurance based in San Francisco) and PolicyGenius (an insurance comparison site) are all startups that look and act much differently than today’s insurance giants. They are designed to appeal to millennial buyers through digital ease of use and the intimacy born of social media.
Dozens of software-based startups are going after insurance market segments that are ripe for disruption—segments characterized by high margins, inefficiencies and unmet customer needs. Along with these upstarts, non-traditional players such as tech firms will continue to move more aggressively into the insurance space over the next 12 months, putting even more pressure on traditional insurers.
However, the Forrester report notes a trend we observed in last year’s Accenture Digital Insurer Survey: more large insurers are investing in digital technologies, including promoting digitally savvy executives to senior positions. For example, British-based multinational insurer Aviva last year hired Andrew Brem as its chief digital officer, reporting directly to the firm’s CEO. Brem’s background includes significant e-commerce and digital leadership roles at British Gas, Carphone Warehouse and McKinsey.
The Forrester report goes on to predict that by the end of 2015, “partnerships with third parties like banks, real estate brokers, and cable companies will uncover new sources of value through connected car, home, and life insurance products and services.”
Based on the rapid pace at which the digital world is evolving, these partnerships can’t happen too soon.
Next week I will discuss what several European-based insurers are doing in the way of investing in tech startups.
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