Published on the 08/03/2016 | Written by Beverley Head
One in four Australians would be quite happy to buy insurance products through a technology company like Google in the future; it’s a wake up call for the insurance sector…
Capgemini’s newly released World Insurance Report 2016, makes clear that there is a whole world of disruption waiting for insurance companies internationally. The industry it notes is struggling to match expectations of younger customers, grappling with new risk models made possible by the internet of things and the opportunity for dynamic pricing, and largely unprepared for a raft of technologically enabled disruptors.
Perhaps the most startling revelation is that almost a half of Gen Y consumers – born between 1981 and 2000 – said that they would in the future be happy to buy insurance from a technology company. Some already are, the report notes a series of disruptive insurance start ups such as Guevara, a peer-to-peer car insurance company, and Friendsinsurance which harnesses social networks to allow consumers to pool their policy purchasing power.
As the report notes this is “Threatening to disrupt the way insurers interact with their customers and destabilising traditional engines of profitability.” At present “Customer expectations are evolving faster than insurers’ ability to innovatively address their expectations.”
A recent Ovum report, based on a survey of 390 insurance companies also uncovered an appetite for digital transformation.
According to the Capgemini report a chasm is however opening up between what consumers say they want to do with regard to new technology and insurers think they want to do. For example 23.1 percent of consumers said they would adopt driverless cars (19.3 percent of Australians) while insurers thought the figure would be 16.3 percent. And insurers were overly optimistic about wearables, thinking that 48.9 percent of consumers would use one while fewer than a third were actually interested (and an even lower 20.6 percent of Australians).
Insurers, the report warns, have to lift their game especially since “new technologies may cause a shift in the basic insurance principles and business models…connected technologies may gradually introduce more risk mitigation models” instead of simply shifting risk from consumer to insurance company in return for a premium.
In the future the report canvassed the opportunity for more dynamic pricing of risk premiums based on granular understanding of actual behaviours.
It recommends that insurance companies which want to start to transform begin with three basic steps: audit their current capability; assess their readiness for change; and establish the future position they wish to achieve.
