A recently published PwC report found that 90% of insurers fear they will lose business to startups disrupting the industry.
Annual investments in insurtech startups have increased fivefold over the past three years, with cumulative funding reaching $3.4 billion since 2010. As customers demand personalized insurance products and companies increasingly try to cut costs, almost half (48%) of insurers fear that up to 20% of their business could be lost within the next five years to standalone insurtech startups, which are accessing and analyzing data in new ways quickly, not thwarted by legacy technology systems.
Insurance executives see pressure on margins (73%) and loss of market share (69%) as the top threats startups poses to the industry while cost reduction (81%) and differentiation (65%) are seen as the most significant potential gains.
In addition, incumbent insurers see IT security as the biggest barrier to working alongside startups.
According to PwC, insurance companies can take four steps now:
– monitor new trends and innovations and establish a presence in innovation hubs such as Silicon Valley, Singapore and London;
– partner with startups and build pilot solutions; and
– develop new products by listening to, and interacting with, startups.