In my previous blog, I painted a possibly rather bleak picture of how the UK insurance market is facing up to the opportunities and challenges of the digital age. I argued that by innovating so early, insurers might now find themselves less well placed to rise to the challenges posed by the disruption being driven by raised customer expectations, new competitors, and new technology.

I’ve spoken quite a bit about customers, but a word or two about the new competitors. The Digital Insurance research makes it very clear that insurers generally (64 percent) across the countries covered see new external players as real threat. Fourteen percent say such competitors have already entered their markets, and 50 percent expect it to occur in the next three years. Interestingly, Google tops the list as the most likely new entrant, followed by new aggregators and then Amazon.

The threat is perceived as more severe in the P&C space. Is this because Life and Pensions providers don’t yet believe that the change is coming or is it less likely to be applicable?

When looking at the geographic analysis, one gets a sense that UK insurers might be rather underestimating the threat—only 42 percent of them see competition as strongly intensifying, with 58 percent seeing it as not changing or only intensifying slightly. German (88 percent) and Spanish (55 percent) insurers are much more likely to expect competition to intensify.

To me, it’s an indicator that perhaps UK insurers are slightly complacent about the extent of the disruption that is upon them, and the potential of these new entrants to disrupt the market. In part this may be due to the fact that the current leaders were themselves disruptors, and don’t realise fully the extent to which they have become the new establishment. Backing this up, as the figure shows, very few UK Insurers saw the need only for moderate transformation of distribution and operating models, whereas their peers in France, Spain and Italy showed a greater range of strategies.

Scoping the digital threat - Approaches toward the digital transformation of distribution by country
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Scoping the digital threat - Digital transformation of distribution approach by country
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So, if a slight sense of complacency is one threat to UK insurers, another is the challenge of legacy systems, processes and mindset. It’s surely highly significant that the two top challenges identified by UK insurers are their limited multi-channel capabilities and level of required investment. Just behind is an equally significant group of three: complexity of change management for existing channels, existing IT systems and organisational agility.

In other words, a lack of money to fund the profound change that is needed to compete on a totally changed playing field, and how to deal with the legacy they already have in a constructive way.

Next time, I’d like to start exploring some solutions.

Read the full report on the 2013 Accenture Digital Insurance Survey.

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