Half of insurance customers are willing to consider insurtechs
Insurtechs have secured more access to capital allocation from investors in the last few years and by the end of 2020, the total market cap of listed insurtechs surpassed $22 billion, according to the World Insurtech Report 2021. But capital isn’t the only thing insurtechs are gaining access to: More than half of customers are also now willing to consider an insurtech for coverage.
The increase in willingness is likely because the access to capital has led insurtechs to build out their digital capabilities and improve the customer experience. The report from Capgemini, information technology and consulting company, and Efma, a nonprofit organization for banks and insurance analysis, includes surveys, discussions, interviews and an analysis of over 900 insurtechs.
Seth Rachlin, executive vice president and global industry insurance leader at Capgemini, said insurtechs are focused on reach.
“Throughout our World Report series this year – both in the insurance and insurtech report – we have been focusing on what we call the CARE equation, which stands for convenience, advice and reach.”
Convenience is related to 24/7 access, quick response time and omnichannel access to policy and account management. Customers also want personalized advice and the ability to manage their risk profile across their policy life cycle. Customers expect insurers to reach out and engage meaningfully according to their preferences – such as via risk-prevention propositions or capabilities to offer unintrusive support in moments of need, Rachlin explained.
“Investor capital has enabled insurtech to invest in those areas that can add value and challenge existing players,” Rachlin said. “This focus is a perfect match with the need of incumbents.”
According to the survey results, 75% of insurers report their advanced data handling capabilities must improve, and face challenges using predictive analytics across the value chain, and 70% are seeking collaborations to assess customer insights and preferences better.
Rachlin said market potential for insurtechs is expected to grow at a 36% CAGR in 2020-2024.
“We expect some of these players to have a fundamental influence on the future shape and size of the industry,” Rachlin said. “Now, we also expect the focus to shift on scaling up capabilities and we do expect there will be a process of natural selections as investors focus on the fundamentals. But, as we have seen in the dot com bubble, you only need a handful of very successful companies to change the world.”
The report predicts two scenarios if trends continue:
- Embedded insurance as a value add within a third-party ecosystem. Insurance would be delivered at the point of sale.
- Added value at the core of complex offerings. The customer relationship would be central and products would be predictive and technology-enabled.
“To navigate today’s dynamic environment and to be future-proof, insurers need to move from doing digital to being digital, and to do this they need to adopt a modular and specialized value-chain where each player focuses on their strengths,” Rachlin said. “In this environment, we see insurers increasingly becoming orchestrators of their value chain and leaders or participants in other third-party ecosystems.”
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