Insurtech startups are a growing cause of concern for the traditional insurance markets according to new research from NTT DATA.
Despite a 333-year head-start on their rivals, the traditional markets are having to increase investment into new technology to counter the growing threat of insurtech – a full 93% of the London speciality insurance market said they are planning to increase their level of investment into technology in the near future.
Insurtech startups have globally raised more than $11bn in the last three years, more than double the previous period. Not only this, the average deal size increased from $7.5 million to $13.8 million.
The fastest growing area of insurtech investment is AI-based startups, where $2.02 billion has been invested – an increase of 665%.
The History>>Made Faster research asked 100 leaders in the specialty insurance markets their views on their future and found that innovation is concerning for the traditional insurance markets as they attempt to keep pace with not only the startups, but other insurance hubs around the world, from Singapore to the US. Concerns cited included:
- Over two-thirds (69%) of respondents confirmed that if they do not invest, they believe they will be left behind in the technology stakes
- Over half (53%) believe that their legacy systems are holding them back versus legacy-free startups
- Two-thirds (66%) of businesses reported that they struggled with pushing through change. The change function still isn’t empowered to drive through change in these traditional companies.
The biggest areas of investment by the incumbents are Cloud at 64%, IoT at 53%, and AI at 51%.
Kim Gray, Head of Insurance at NTT DATA UK said: “The London speciality insurance market is the leading global hub for insurance and reinsurance, but that enviable position is under serious threat from other hubs and tech start-ups with a much lower cost base. They are smaller and more agile, making them better able to embrace technological change, and the resulting step-change, in improved customer service that smart new digital systems promise.
“The research makes it clear that the London Markets understands the requirement of change and the majority have a vision and strategy in place to maximise on the opportunity the change agenda presents. However, having a strategy is one thing, but implementing it is quite another.
The good news is, there are ways around these constraints, such as ensuring buy-in from all key stakeholders at all levels and managing for outcomes, not just activities. Moreover – when it comes to executing to reach your vision – rather than focusing on ‘big concept’ projects, The London Markets must focus on easy-to-implement solutions that target key business problems in an agile way. Continuous incremental change will get you where you need to be.”