To what extent is the market being challenged by digital innovation?

Insurance & Reinsurance

Turkey Small Flag Turkey

Many insurance companies are developing their digital innovation capabilities while facing challenges and trying to understand this new era is reshaping the insurance sector. Active use of digital platform as an important sales channel resulting positively growth.

Digital developments open new doors to insurers at every stage of sales, thus insurers are now under pressure to go digital, unless they might be behind the deepened competition in a new platform.

Ireland Small Flag Ireland

In many ways, digital innovation has yet to come to the fore in the insurance market. However, the challenges created by such innovation are increasingly relevant. The growing sophistication of digital technology gives rise to cyber-security threats and risk of data breaches. The nature of the insurance market itself is also being challenged by digital innovation. We are seeing an increasing trend towards risk prevention rather than insuring against risk. Advanced technology has created safer cars and smarter devices which can prevent household damage, thereby mitigating risk and reducing premiums. Insurers will have to adapt to the technological needs of the market or risk being left behind.

In order to rise to the challenges created by digital innovation, insurers must seek to create innovative products, which protect against data loss or cyber damage. In addition, the introduction of automation into the workplace will change the nature of many roles in the insurance industry and the market will have to adapt by reducing administrative and operational support, in favour of skilled resources such as analytics and software development.

United Kingdom Small Flag United Kingdom

The London Market is expected to be transformed by digital innovation such as telematics devices, distributed ledgers and connected devices (or the Internet of Things). Similarly, the harnessing and use of Big Data will change underwriting as insurers will have far greater access to personal (or at least risk-specific) information than ever before. With more personalised information and with automated processes, for example automated claims handling, insurers are seeing an opportunity to offer customers new product lines with potential cost savings.

Adapting to new business models will require significant investment (whether in research and development or acquisitions) by existing market players and start-ups are attracting funding. New market entrants that design their business models around new technology and the use of digital information may be able to steal a march on their competitors. In an overcrowded market, many existing product lines are likely to struggle without adaptation to the new digitally-reliant environment.

Sweden Small Flag Sweden

Digital innovation forces insurance companies to redefine how to conduct insurance business and what the primary risks are. With the last couple of years’ surge in both amounts of data available and the sophistication of the tools to analyse and exploit the said data available, insurance companies face both new opportunities and new risks. The insurance market is therefore greatly challenged by digital innovation, with Big Data and easy-to-use analytical tools probably being two of the more eagerly anticipated challenges to master at the same time as cyber risks are one of the current top emerging risks, which, together with regulatory challenges, most notably in the form of the General Data Protection Regulation entering into force next year, will probably prove a litmus test for which insurers – old and new – will adapt enough to not only survive, but thrive in this new digital landscape.

It is therefore important that insurance companies look over their willingness to adopt new technology and be open to new ways and ideas. Depending on how far insurers will be pushed to digitalise their business offerings and their models for selling insurance products and indemnifying policyholders, it is also not hard to see how this opens up the field for cyber-based newcomers and other tech-savvy players.

Germany Small Flag Germany

The German market is expected to be transformed by digital innovation such as telematics devices, distributed ledgers and connected devices (or the Internet of Things). Similarly, the harnessing and use of Big Data will change underwriting as insurers will have far greater access to personal (or at least risk-specific) information than ever before. With more personalised information and with automated processes, for example automated claims handling, insurers are seeing an opportunity to offer customers new product lines with potential cost savings.

Adapting to new business models will require significant investment (whether in research and development or acquisitions) by existing market players and start-ups are attracting funding. New market entrants that design their business models around new technology and the use of digital information may be able to steal a march on their competitors. In an overcrowded market, many existing product lines are likely to struggle without adaptation to the new digitally-reliant environment.

Norway Small Flag Norway

The market is certainly being challenged by digital innovation. Retail and plain vanilla insurance products have been underwritten online for many years, and various price matching engines make it easier than ever to find the right price for a given plain vanilla product. As the development of computer software and hardware continue, we will likely see a similar trend for more sophisticated and complex insurance products.

Mexico Small Flag Mexico

Digital innovation is currently being used in preliminary stages within the insurance industry, mostly by facilitating comparing different insurance products and placement of insurance within the population; use of technology to facilitate sales and adjustment of claims is starting to grow; the regulator is taking a cautious approach to the use of technology and we have not seen aggressive approaches by the industry to try and test the market. We certainly hope the use of technology helps improve penetration within an underdeveloped market.

UAE Small Flag UAE

Pursuant to IA Circular No. 45 of 2014, all insurance companies are required to maintain “electronic copies of all company (paper) documents easily accessible in the event of hazardous incidents...”. This has resulted in implementation challenges for the affected companies. Likewise, the speedy development and rollout of ever increasing methods of marketing and distribution of insurance material through digital means has created challenges not dissimilar to those faced by insurers in other jurisdictions.

United States Small Flag United States

The insurance market in the U.S. is beginning to reflect the impact of increased digital innovation. The growth of new technologies that harness digitalization and provide greater efficiency within the current insurance industry model follows an industry shift toward a consumer-driven approach, which fosters greater product personalization, and empowers industry participants to offer new products and deliver current products more efficiently. State insurance regulators will need to consider whether existing insurance laws are sufficient to address new regulatory issues that may arise from the increased use of technology or whether new or different rules should apply.

Austria Small Flag Austria

As with almost every industry, digitalisation has also reached the insurance sector. It is, however, still lagging behind other service industries in terms of implementing digital innovation. This is partly due to the dense regulatory environment, which makes it more difficult for insurance undertakings to adopt new technologies while complying with regulatory requirements.

Established market players are thus challenged by innovative start-ups that are willing to disrupt the sector. Startups such as Amodo, which has received funding by Austrian-based venture capital fund Speedinvest, analyse data gathered from digital devices to allow better assessment of a customers’ risk exposure and product requirements. While this approach allows further individualization of insurance products, concerns as to the use of sensitive data will have to be addressed.

Recently, key players in the Austrian insurance market have declared digital innovation as their main development target. In 2016, one of the leading insurance companies in Austria and the CEE region announced an investment program in the amount of EUR 500 million aimed at adapting procedures and products to the change in customers’ expectations and needs owed to digital innovation.

Chile Small Flag Chile

The local insurance market, fostered by market development and regulations, has implemented new digital solutions enabling the online contracting of insurance policies, the online reporting of losses and remote access to loss adjustment processes information. Over the last few years, insurance related laws and regulations have also adapted, and currently recognize email communications as legal notices, the validity of online policy contracting, the submission of online information to the Insurance Regulator, websites enabling consumer to compare prices on vehicle and property insurance, etc.

Switzerland Small Flag Switzerland

Several InsureTech start-ups have been established within the last years and we believe that further start-ups will follow. FINMA tries to make Switzerland a FinTech/InsureTech hub and gradually provides for a proper regulatory environment. We also observe that traditional insurance companies have recently started to take digital innovation seriously and that they invest a considerable amount of time and money in connected projects.

Peru Small Flag Peru

One of the main challenges for the insurance market facing digital innovation is the exposure of privacy and confidentiality derived from piracy or computer attacks. To face this, insurance companies must manage the associated risks with information technology, related to failures in the security and operational continuity of computer systems, errors in the development and implementation of such systems and the compatibility and integration of them, inadequate investment in technology, among other aspects.

India Small Flag India

With the significant increase in e-commerce transactions over recent years, the IRDAI has recognised the sale of insurance products online. The IRDAI has also recognized web aggregators (entities engaged exclusively in solicitation and procurement of insurance products online) as insurance intermediaries and has issued specific regulations for the licensing of these entities.

In addition, the IRDAI has also recognised the issuance of e-insurance policies. The IRDAI is consistently working to make the issuance of e-insurance policies easier for both insurers as well as the prospects/policyholders. However, growing trends in digitisation are giving rise to certain practical challenges in the instantaneous issuance of e-insurance policies.

Singapore Small Flag Singapore

Many insurers are beginning to adopt technology in their operations to engage and retain consumers and manage increasing operation costs. As large quantities of sensitive and personal data are stored on servers or held in the "cloud", effective risk management to minimize and contain risk of breaches is paramount.

Digital innovation has also brought about new and emerging risks (e.g. cyber-attacks and use of autonomous vehicles) and evolution of traditional lines of business like motor insurance (e.g. to cater to new consumer technologies such as Uber). The insurance industry needs to regularly gather and review risk data and loss scenarios brought about by technological innovations to enhance the relevance of insurance coverage provided.

Brazil Small Flag Brazil

This is a very new and controversial subject in Brazil. Regarding internet sales, in addition to the legal issues surrounding the security and validity of insurance contracts, there is a natural aversion by brokers to direct sales, precisely because it excludes them. However, most insurers are studying ways and means of taking advantage of digital innovations, whether in terms of providing information about their products, the possibility of direct interaction with their policyholders or offering and selling products. Internet sales are likely to grow in the coming years.

Israel Small Flag Israel

The Insurance Commissioner announced that he will support any new company which will be fully digitalized. This support means, substantial lowering of the initial requirement for Insurers’ licensing. Once such a company will start operating, it will challenge the other Insurers.

Belgium Small Flag Belgium

Digital innovation and InsurTech companies are growing quickly in Belgium. The new technologies and possibilities they offer to the insurance consumer certainly challenge the well-established insurers. Some of those have already invested in InsurTech companies.

InsurTech companies are also challenging well-established legal principles, leading to the conclusion that, at some level, Belgian legislation may no longer be appropriate for the insurance industry of the 21st century and will need further modifications.

France Small Flag France

The French insurance market has already started its digital transformation, which is deeply integrated in the market leaders’ respective strategies and investments in digital innovation represent around 1/3 of the strategic plans and of their budget on a 3-year/5-year basis.

Digital innovation is applicable to the whole scope of the insurance sector, i.e. from prevention, underwriting, customer relationship to loss management.

The French major market players are seeking to fund or otherwise set-up strategic alliances or partnerships with start-ups active in the digital sector.

Canada Small Flag Canada

There is a broad recognition in the Canadian insurance market that the growth of InsurTech will cause significant disruption to current business practices in the near future. Some domestic insurers have started to embrace digital innovation by, for example, using tracking technology to provide usage-based auto policies or partnering with FinTech companies to provide insurance to the growing sharing economy.

Spain Small Flag Spain

In our view, this challenge applies the same way in Spain than in any other country. Insurers
must be prepared to adapt to new distribution channels (mainly internet) so that sales of their
products (including traditional products) can be concluded through the new channels. Players
that cannot invest on developing this may lose substantial business opportunities.

Updated: June 13, 2017