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31 July 2020
Insurers are stepping up insurtech collaborations but only half the sector believes enough is being done to drive digital innovation across the industry through partnerships, a report has found.
The Ernst & Young and Insurtech Australia third annual survey finds 80% of insurers are collaborating with an insurtech, with most partnerships focusing on specific solutions within pockets of a business rather than a taking a wider approach.
EY Oceania Insurtech Leader Andrew Parton says insurers need to move beyond “random acts of digital” and put infrastructure in place so legacy systems can connect with new technologies.
“While it’s pleasing to see more collaboration and partnerships occurring, most Australian insurers are still only using insurtech tactically, rather than trying to develop a more strategic whole-of-business digital ecosystem,” he said.
The report says partnerships in the main are occurring at a small level, with the industry “some way from maximising value creation at scale”.
Currently, 63% of insurers have partnerships with between one and three insurtechs, with 14% partnering with five or more.
“This will change over the next few years as insurers seek to increase their number of insurtech partnerships to broaden their digital ecosystem and extend insurtech use across their entire value chain,” Mr Parton said.
The survey finds that two-thirds of incumbents believe partnerships with insurtechs will become mainstream within the next three years.
Some 58% of insurers expect a large volume of insurtech acquisitions over the next three years as capabilities are expanded, while an equal percentage expect consolidation of insurtech providers.
Insurtech Australia CEO Rita Yates says encouraging results from the survey include the increase in partnerships and positive attitudes toward collaboration. The survey finds some 70% of the industry agree insurtechs will play a major role in helping incumbents become more digital.
“In previous reports there was more of an element that insurtech was an interesting piece of technology which sits outside the main business that could be interesting to delve into,” she said.
“It has now become more of a business-as-usual element that incumbents are looking to explore.”
Ms Yates says it is important key people across an insurance business are involved in insurtech strategies to ensure solutions are successfully integrated and not lost in proof-of-concept processes.
“There are some areas where there is some really good value starting to be created as part of these partnerships,” she said. “The report specifically pulled out claims as an area where value is being developed.”
The report says digital innovation can also drive efficient administration, pricing and underwriting agility and the development of differentiated products.