A
For starters, insurance executives’ confidence in their own innovative abilities has nosedived. The percentage expecting an existing insurance company to disrupt the market with some kind of new innovation dropped from 59% in 2015 to 33% this year. It could suggest that some cold water has been splashed over insurers’ attempts to either co-opt, absorb, or partner with the emerging insurtech sector.
So, insurers are recognizing they can’t be insurtechs -- however, that doesn’t mean insurers are scaling back on innovation. If anything, they’re ramping things up. At least 77% believe the industry’s “appetite for radical innovation” has increased over the last 12 months, the report’s authors state.
At the same time, eight out of 10 respondents fully expect to see digitally enabled new entrants gain a foothold in their markets. “This is both an opportunity for incumbents – providing a route to more sustainable premiums – and a challenge,” the report’s authors point out, adding that new models with ho cannot deliver a new model that adds real value to the customer will lose market share to those who can."
If anything, insurtech innovations will be mainstream within the next five years. By 2021, 65% believe that on-demand insurance will prevail; 57% believe insurance will become part of a wider package of digitally-enabled value-added services; and 56% expect to see pay-as-you-go insurance replacing the annual renewal.
There are two factors insurers are struggling against: a need for leadership (and corporate culture) open to new, digitally driven ideas, and issues with legacy systems. “Our findings suggest too many insurers lack the leadership, skills and attitudes to nurture true innovation,” according to the report. Two in three say they lack innovation skills, and 60% identified a “fear of innovation risk” as being significant impediments to innovation.
Legacy systems is another hurdle -- the inflexibility of existing systems is cited as a “significant impairment” to innovation by 81% of executives, up from 63% in 2015. It’s more than siloed data or slow transaction speeds that are at issue, Altus says. The report identifies “legacy thinking” as the culprit that holds mainstream insurers back, and this is a direct result of rigid, monolithic systems. “Legacy systems, with data held in disparate silos, influence how organizations think and act, with people unable to crash through barriers of product or function to create something new and radical.”
