Analysts at Clyde & Co are anticipating that investment in technology will ramp up in the coming year, with potential ramifications for every aspect of insurance companies’ operations, from internal processes to the products and solutions they deliver to customers.
The global COVID-19 pandemic has already accelerated the push to digitisation across the insurance sector, and it’s thought that insurance operating models will continue to undergo digital transformation in the year ahead.
But while traditional insurance players will certainly continue to explore new digital business models and technologies, Clyde & Co predicts that major disruption will also result from a surge in start-up businesses.
“Up until now, many insurtech disruptors were start-ups steered by ambitious young people with impeccable technology credentials but limited knowledge and understanding of the insurance industry,” noted Yannis Samothrakis, partner at Clyde & Co.
“They typically arrived with a solution looking for a problem to fix and often stumbled when confronted with regulatory and compliance obstacles as well as with the complexity of insurance distribution,” he explained.
“This situation is now being reversed. We are seeing the arrival of a new generation of market-savvy insurtechs staffed with experienced professionals who are offering a compelling combination of technology and risk coverage.”
According to Clyde & Co, this trend will likely be fuelled by a number of factors, including the need for insurers and insurance to be appealing to young buyers, the ongoing availability of cheap capital, and the need to take stock and consider alternative offerings.
Together, these influences should lead to “a further surge of new entrants in the non-life sector,” analysts say.
These will typically focus on specific niche market segments that have proved difficult to access or generate a profit for traditional insurers, and will likely have strong partnerships with existing networks, including legacy insurers and reinsurers.
In many cases, Clyde & Co expects these entrants to pursue an affinity model, supplying insurance bought in conjunction with a product or service, such as event cancellation cover.
Other likely areas for disruption include health and travel insurance, products that protect against the impacts of the climate crisis, and cyber insurance to support the need for increased digital protection as all industries undergo a similar transformation.