Editor’s Note: This article is excerpted with permission from Deloitte 2021 Insurance M&A Outlook. Click here to find the full report.
Some of the early insurtech investors formulating an exit strategy may trigger one or more IPOs or acquisitions by insurance companies to accelerate capacity building, such as accelerating digital efforts. Not only has the COVID-19 pandemic severely disrupted the day-to-day operations of insurance companies – sparking a radical shift towards remote working and virtual customer engagement – but it has also uncovered substantial gaps in business models. insurers and the digital capabilities they are expected to work on to close in 2021.
Deloitte’s August-September 2020 global survey of insurance executives found that 79% of respondents believe the pandemic has exposed gaps in their business’ digital capabilities and transformation plans. In response, 95% of respondents are already accelerating or seeking to accelerate digital transformation to maintain resilience.
Historically, the insurance industry has underestimated technology investments, creating a digital divide between insurers and current and potential clients. To deliver a frictionless end-to-end customer experience, improve operational efficiency, and accelerate innovation, companies in the insurance industry need to think and act digitally. The urgency to act – in part in response to the disruption caused by COVID-19 – is accelerating organizations’ efforts to achieve over the coming year what could have been the source of the transformation plans of three to five years. Among survey respondents, investment priorities include cybersecurity (66%), cloud computing (59%), data privacy (53%), and data analytics (49%).
Forty percent of those surveyed expect to increase their investments in direct online sales, which is understandable, as most customers likely did not want to meet with insurance sellers in person during the pandemic – a trend that could continue in the long term, especially with a younger audience that is already mastering digital engagement. Insurers are also looking to invest in AI, alternative data sources, and more advanced predictive models, not only to automate routine, labor-intensive data collection and processing tasks, but also to increase the capacities of the subscribers and possibly to take them to a higher level. , value-added roles such as portfolio management and greater interaction with brokers and large clients.
Brokers and agency channels appear to be the leaders when it comes to investing and using insurtech. Personal P&C insurance (eg auto insurance) has a fairly high degree of digitization, business lines less. Group insurance is a mixed bag. For example, dental claims handling is moving entirely digital, and some companies have tried to create digital experiences to make it easier for employees to do business with them, but they also recognize that there are opportunities to digitize more. ‘basic and back-office operations. Life insurers, whose face-to-face sales model has been most disrupted by the pandemic, have used tactical digitization to weather the crisis. Further on is a potential hybrid selling approach in which consumers transact primarily online, but have the option of participating in a live chat or phone call with a representative to ask questions or clarify complex political information. .
While many insurance companies buy specific digital capabilities (typically faster and more cost effective than developing them in-house), others buy full insurtechs outright. For example, Prudential Financial acquired Assurance IQ in 2019 to reach a new demographic group using insurtech’s business-to-customer platform. Even with the increase in digital investments, insurance companies can miss the boat in terms of true innovation unless they get rid of outdated ways of thinking as well as their existing IT systems and software. In addition, they should broaden their view of insurance providers beyond that of providers to partners and code developers and actively seek partnership and investment opportunities with the startup community.