A new study has found that while only one third of European insurers consider themselves to be highly innovative, 70% believe that a failure to innovate will restrict growth or see them fall behind the competition.
The insurance sector has long held a reputation for conservatism, but there are clear signs that Europe’s major carriers see innovation, rather than large M&A programmes as being the key to their future success, a report from market research and strategic consulting company PAC said today.
PAC has undertaken an in-depth study of how large and medium-sized insurers in the region are driving innovation across their business, and moving from pockets of initiatives around the edge to building organization-wide strategies.
The report, “Harnessing Innovation in European Insurance” is based on briefings with 200 senior business and IT executives at large life and non-life carriers across Western Europe. With seven out of ten of Europe’s largest carriers appointing new CEOs in the last 18 months, a new breed of leadership are laying the foundations for innovation.
84% of insurers state that they have a formalized innovation strategy, supported by dedicated teams, processes and budgets. Some 60% see improving customer engagement as the primary focus for their innovation strategy. This highlights how carriers, during a time of stagnating premium growth, are looking for new ways to drive customer loyalty and acquisition.
Regulation is seen by insurers as the biggest barrier to innovation, but one third cite ageing technology and infrastructure as a major obstacle. Alarmingly, two thirds of carriers admit that less than half of their business applications are fit and able to support their future digital strategy.
Nick Mayes, Principal Analyst at PAC, said: “There is a new innovation imperative for insurance carriers. Low interest rates, economic headwinds and changing customer behaviour are pressuring all traditional insurance lines. Meanwhile, 80% of carriers are experiencing disruption from new competitors.”
“The insurance sector is currently experiencing major disruption from online carriers, aggregation websites and changing product demands. Innovation is absolutely critical to determining the right responses to a disruptive market, and it is only innovative insurers that will be the future leaders in this market,” commented Kraig Rutland, Head of Insurance, BAE Systems Applied Intelligence. “Insurers need to focus on their agility, including strategies for breaking free from legacy IT, and much smarter use of data and digital channels. This transformation needs to be undertaken rapidly but critically without compromising the integrity, availability or security of impacted systems and data.”