Having lagged behind their financial services peers in adopting digital technologies due to regulations, reluctance and cost, an increasing number of insurers now regard investment in digitisation a priority. These are the conclusions of a survey conducted by Willis Towers Watson, which shows that almost three-quarters of insurers believe the insurance sector has failed to show leadership in digital innovation.

Cost is a major challenge with respondents blaming the length of time required to commercialise new technologies (32%) and the size of investment required to transform (24%).
EMEA life insurance M&A leader at Willis Towers Watson, Fergal O’Shea, said banks have had a head start in this arena. “The quality and frequency of the information exchange between insurers and customers, who may simply be renewing a policy once a year, just isn’t the same,” he explained.

“However, insurers recognise the importance of building a sustainable digital infrastructure to improve customer engagement and as an essential distribution channel, which is likely to be addressed through internally-driven innovation, joint ventures and M&A activity. For those that hesitate, there remains the commercial risk that they will get left behind and fail to capture future generations and younger policyholders who are more likely to engage via digital distribution.”

Almost half the respondents to this survey (49%) now expect to make an acquisition over the next three years directly driven by the desire to acquire digital technologies, including 14% that intend to make more than one acquisition.

The survey suggests nearly all respondents (94%) expect distribution to be the area where digital technologies have the greatest impact over the next five years. Insurers also see claims processing and loss adjustment, and customer management as strategic priorities.

Willis' P&C insurance leader, Andy Staudt, explains this common concern for the sector. “Distribution is a recurring theme for insurers surveying the digital landscape, as it offers opportunities to find new ways to market – and to build closer, more engaged relationships with the consumers of their products and services.”

Web and mobile delivery channels are the stand-out technologies over the next two years according to insurers taking part in the survey (77%), with big data, automation, robo-advice and sensors also singled out as key areas over the next five years.

At the same time, insurers also recognise the huge challenge and opportunity to leverage digitisation to create operational efficiencies throughout the business that will not only manage cost, but also streamline processes to significantly enhance customer experience.

When it comes to digitally disrupting the industry, 45% of insurance companies believe they themselves will be the most likely to do so in the years ahead, while the same number tip start-up businesses to have the biggest impact. Just 8% see new entrants from the technology sector as likely to disrupt their marketplace. While 
the likes of Google and Facebook are inevitably singled out as potential disruptors of many industries, insurers appear relatively sanguine about the threat they pose.

“To improve margins in the current 
low interest environment, insurers need to find margins in the way they do business and grow their customer base which technology can help with,” O’Shea added. “Disruption in how firms do business 
is needed for product innovation, as is improved engagement with future generations of policyholders, which can improve customer lifetime value and profit margins.”

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