Insurtech firms will continue to be important insurance innovators but well-established carriers are likely to be the biggest drivers of digital disruption in the future.

Agile start-ups, such as Lemonade, Trōv and PolicyGenius, have been quick to use advanced digital technology to create innovative new insurance businesses. Traditional insurance providers, however, are catching up fast. Many of them are teaming up with such insurtech firms as investors or business partners. Others are allocating big budgets to develop their own digital initiatives.

Insurtech companies will continue to be important innovators in the insurance sector.  However, the extensive digital transformation of the industry is likely to be driven by the big well-established carriers.

Around 37 percent of the companies we surveyed for our global Technology Vision for Insurance survey believe their traditional competitors, not insurtech firms, will be the source of the greatest disruption to their businesses. Insurtech companies were identified as the top likely disruptors by only 24 percent of respondents.

Investment in insurance technology, often backed by major carriers, increased almost ten-fold in three years to more than US $2.6 billion in 2015 before steadying at around US $1.7 billion last year, according to researcher CB Insights. The bulk of this spending has been directed at improving insurance distribution and marketing. However, policy administration, claims processing, risk management, underwriting and analytics are increasingly attracting substantial technology funding.

Big insurance providers that have already invested heavily in digital technology to broaden their businesses include:

John Hancock: Partnered with South African insurer Discovery to launch its Vitality wellness program in the US.

MassMutual: Using direct online selling to target niche markets in the US, including retirees and, through its Haven Life start-up, Millennials.

MetLife: Combining online and contact-center marketing and support to target middle-market consumers in the US.

Generali: Expanding its P&C and life business in Germany through product and service innovations in its CosmosDirekt digital channel.

AIG: Offering online insurance aggregator and sales facilities in through its AIG Direct service in the US.

Far-sighted insurers, such as those mentioned above, are capitalizing on the many new business opportunities emerging from digital disruption. The illustration below shows the key areas of value creation.

Key areas of value creation: Customer Delight, Underwriting Excellence, Risk Aggregation, Selling Supremacy, Product & Service Innovation.

To take advantage of these new opportunities, insurers will often have to shake off some of the traditional business orthodoxies that have served them well in the past. Long-held attitudes about customer needs, pricing and risk assessment, for example, may have to give way to new thinking that emphasizes personalization, rewards and data sharing.

Furthermore, responsibility for technology budgets and operations will move away from traditional IT professionals, such as chief information officers, to business executives and line managers. Around 40 percent of technology budgets and authority currently sits outside corporate IT departments, according to Gartner. This is likely to grow to 55 percent by 2021. IT specialists will increasingly focus on balancing IT resources between traditional legacy and new digital platforms and meeting business demands for variable, often multi-speed, services and support.

In my next blog post, I’ll discuss why insurers need to stop thinking like insurers and find new ways to build their businesses in the digital future. Until then, take some time to look at these links.

Technology Vision for Insurance 2017: Technology for People.

The Voice of the Consumer: Identifying Disruptive Opportunities in Insurance Distribution.

The Rise of Insurtech.

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