Adoption of technology based or bought insurance is expected to increase dramatically, as InsurTech’s look poised to hit the mainstream, according to data from a survey by EY.
Consultancy, assurance, tax, transaction and advisory specialist EY surveyed 22,000 digitally active consumers from across 20 markets as part of its FinTech Adoption Index, finding that insurance technology usage has risen significantly in the last two years.
Thanks to the significant buzz surrounding InsurTech and the clear opportunity spotted by entrepreneurs and venture investors to target the re/insurance sector, start-ups are now proliferating meaning that digitally active consumers are increasingly likely to engage with their insurer through technology.
In terms of adoption, insurance has made enormous gains as it was among the least commonly used FinTech services in 2015 and has now become the second most popular in 2017, with 24% usage, greater than both savings and investments, and borrowing. In future this Insurtech adoption rate could rise to as much as 55% globally, EY’s analysis suggests.
However, EY notes that what drove much of this increase is the expansion of the sector into technologies such as telematics and wearables, as well as the inclusion of insurance premium comparison services.
Overall, an average of 33% of digitally active consumers across the 20 markets surveyed now use FinTech services, EY found.
But emerging markets are driving much of this adoption, as China, India, South Africa, Brazil and Mexico average 46%, while China and India in particular have the highest Fintech adoption rates at 69% and 52%.
For comparison, the UK which has been a fast adopter of technologies generally, particularly online services, has an adoption rate of 42%.
Imran Gulamhuseinwala, EY Global FinTech Leader, commented on the survey results; “FinTechs are clearly gaining widespread traction across global markets and have achieved the early stages of mass adoption in most countries. The EY FinTech Adoption Index finds, on average, one in three consumers already consume FinTech services on a regular basis.
“FinTechs, particularly in the payments and insurance space, have been very successful in building on what they do best – using technology in novel ways and having a laser-like focus on the customer. It really is now a critical time for traditional financial services companies. If they haven’t already, they need to urgently reassess their business models to ensure they are able to meet their customers’ rapidly changing needs. Disruption is no longer just a risk – it is an undisputable reality.”
EY believes that global Fintech adoption could rise to an average of 52%, with South Africa, Mexico and Singapore expected to see the greatest potential increase.
Gulamhuseinwala continued; “There are those who believe that FinTechs struggle to translate the innovation and great customer experience that they create into real customer adoption. The EY FinTech Adoption Index suggests that thinking is now outdated.
“FinTechs are not only becoming significant players in the financial services industry, but are also shaping its future. Their new propositions are increasingly attractive to consumers and this trend is only set to continue as awareness grows, concerns are allayed and new advancements are made. Traditional firms, who sometimes struggle to deliver the same seamless and personalised user experiences, will undoubtedly need to step up their efforts to remain competitive. I think it’s likely that we will see greater collaboration between traditional firms and FinTechs in the future.”