Insurance companies collaborate with InsurTechs and BigTechs

Following similar developments in the banking sector, insurance companies are facing the heat of small, agile rivals (InsurTechs) and non-traditional players such as BigTechs. This is according to the World InsurTech Report 2020 from Capgemini and Efma. 

The report surveyed managers working in more than 20 countries from all segments in the insurance industry, spanning life insurance, non-life insurance and health insurance. The authors found that incumbent insurance companies are seeing several parts of their business models eroded by more innovative players, in particular those that have strong digital capabilities under the hood. 

One of the key areas where new players are winning the hearts of customers lies in customer experience. InsurTechs and BigTechs have raised the bar for client experience and trust, by providing consumers with streamlined processes, real-time reaction and a user-friendly customer service. “Insurance companies need to become more client centric in everything they do,” said John Berry, the chief executive of Efma.

Anirban Bose, CEO of the Financial Services practice of Capgemini, added: “Insurers need to look beyond other insurance companies in terms of competition and instead keep an eye on BigTechs and other new non-traditional players, which often provide a superior customer experience.”

To illustrate the growing threat of BigTechs such as Apple, Google or Amazon, the willingness of policyholders to purchase an insurance at one of the BigTechs has risen from 17% in 2016 to 36% in January this year, and 44% in April this year, with the recent acceleration caused by the Covid-19 pandemic which has seen many service purchases shift to online channels.

To compete with BigTechs and Insurtechs, the authors advise insurers to work on a number of improvements, including delivering a superior customer experience, customer-centric internal processes, real-time response, and offering insurance packages that are more flexible in their terms and conditions, in particular to meet millennial needs. 

Demonstrating how much digital innovation ground incumbents need to catch up, only 19% of insurance companies surveyed by Capgemini and Efma currently have touchless processes, only 29% have up-to-date systems, and only 38% have implemented open APIs – a key tool that make smart interfaces possible with technologies that facilitate an enhanced customer experience.

Collaboration is another dominant theme that surfaces in the respondents of managers. By collaborating in open ecosystems – as opposed to viewing each other as merely competitors – players can achieve a win-win. Bose: “Forming scalable relationships with InsurTechs will help insurers digitise faster and operate more efficiently, deepen their customer relationships and help them fend off these new entrants.”

Using partnerships is also the quickest route to accessing new technologies, or unique capabilities. A growing appetite for leveraging this strategy is noticeable, with 67% of insurers open to working with InsurTechs, while vice versa 83% of InsurTechs are open to working with insurers. Meanwhile, more than 60% of insurance companies and InsurTechs are interested in partnering with BigTech companies. 

The authors further highlight that there is a cultural side to change as well. For starters, insurers will have to transition from their current mode of focusing on products to a more design-led, customer centric approach. Second, people will have to be prepared and trained for working in a more open-model, including fostering knowledge sharing and adopting a mindset with the client, agility and collaboration at its heart.