The insurance industry’s prudence and risk management has served it well in the past, but its conservative culture could leave it vulnerable to the competitive forces unleashed by the digital revolution, a joint report by business media company Marketforce and the UK’s Chartered Insurance Institute (CII) suggests.
The report says that long-established players in the sector now face the challenge of digitally-enabled innovators, unencumbered by historic cost bases and legacy systems, which are moving swiftly to capture market share.
Marketforce director Juliet Knight notes that it is not the first time insurance companies have needed to absorb and adapt to new competitive threats, citing the shifts that accompanied the rise of direct-to-the-consumer distribution in the mid-1980s and aggregator sites in the 1990s.
Digital disruption, however, comes at a pace that incumbents will find difficult to match. Insurers cannot afford to be complacent: other sectors have provided stark warnings of how comprehensively and quickly once apparently invincible incumbents can be felled by digital competition.
Knight adds that the competitive threat is among many challenges weighing on insurers. Regulatory scrutiny is a significant challenge, draining resources and potentially curbing product innovation. “Data protection rules continue to create headwinds in the fight against fraud,” she adds.
“Legacy systems not only inhibit digital experimentation but are also straining under existing business and compliance demands. And these challenges come as global forces, from climate change to ageing populations to the emergence of machine to machine technology (M2M), drive a requirement for an insurance industry capable of providing the risk management and financial resilience we so often take for granted.”
The survey comprises six sections:
- The evolution of the UK insurance industry.
- Becoming a digital insurer.
- Advancing the analytics agenda.
- Preparing operations for the digital age.
- Optimising the claims process.
- Improving fraud detection and prevention.
Further details can be accessed here.
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