Insurance industry leaders in Australia until now have felt regulation would protect them from disruptive market forces, but that is no longer the case - and with protection of the sector diminishing, there is no place to hide, according to the inaugural Insurance Industry Report 2017 by TAS, a provider of technology services.
The report said: “It is a sink-or-swim mentality, with many leaders acknowledging that they need to keep up, but many not knowing how to adapt. For 50% of the leaders interviewed, disruptive innovation stands out as the main market force that will continue to rapidly transform Australia’s insurance industry over the next 24 months.”
When asked to define ‘disruptive innovation’, leaders spoke about numerous forms of innovation and discussed both the positive and negative impact of these innovations on the sector. Interestingly, the data suggests that companies continue to face barriers to fully embracing innovation, including outdated legacy systems and regulatory burdens.
Due to increased competition, many companies aim to survive by forging new strategic partnerships and collaborations with InsurTechs. So, while innovation is widely acknowledged as part of the industry’s evolution and future fabric, it remains a contentious area that many companies are struggling to come to terms with.
The key headline findings of the TAS report include:
- Disruptive tech is the tipping point for change. In a fast-changing industry, insurers face an uncertain future, with leaders divided over the best strategies for driving internal innovation and progressing the sector.
- Legacy systems are holding insurers back from adapting to change. Many insurers continue to rely upon legacy systems that are simply not conducive to innovation.
- Insurers must adapt or risk being left behind. Innovation is top of mind for leaders as a competitive advantage – yet insurers are unsure how to adapt to disruption and mobilise without losing revenue.
- Insurers feel the heat of heightened competition. To get future-ready and remain competitive, insurers must form new strategic partnerships; improve internal processes; and becoming more customer-focused.
- Insurers are divided over internal talent versus offshoring.
- Regulation is considered a burden but also a competitive saviour. The question is, should insurers focus resources on managing the regulatory burden or direct resources to innovation?
- Best-practice compliance management is key to reducing risk. In a heavily regulated industry, insurers are looking for ways to achieve best-practice compliance management and meet necessary requirements.
- Tech and innovation are key to remaining relevant. Both now and in the future, tech and innovation will enable insurers to enhance customer engagement through advanced data analytics.
- InsurTechs are paving the way for customer-led innovations. With InsurTechs shaking up the industry, insurers are under pressure to adopt more customer-led innovations and partner with InsurTechs.
- Insurers increase spend on the customer, talent and tech. At a time of accelerated disruption, insurers are increasing spend on customer engagement strategies, talent development and technology
Following disruptive innovation, 21% of leaders rated market consolidation as the next major contributing factor changing the sector over the next 24 months.
Research for the report was based on survey responses and direct interviews with C-level executives and industry consultants from a diverse range of public and private insurance companies, including general, medical and life insurers, InsurTechs and start-ups.