Technology in Insurance
Insurers Under Pressure To Go Digital
Nearly half of global insurers expect to acquire new technologies through M&A in the next three years
Hong Kong (Feb. 17, 2017) – Almost three-quarters of global insurers (74%) believe their sector has failed to show leadership in digital innovation, according to a new survey by Willis Towers Watson, a leading global advisory, broking and solutions company.
Willis Towers Watson conducted the survey in conjunction with Mergermarket, and found that an increasing number of insurers now regard investment in digitalisation a priority, especially considering the sector has lagged behind its financial services peers in adopting digital technologies owing to regulations, reluctance and cost. Insurers are finding smarter ways to grow their business through M&A beyond traditional acquisition targets.
"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 a combination of internally driven innovation, joint ventures and M&A activity," said Nicholas Chen, Head of Digital Solutions at Willis Towers Watson in Asia Pacific. "Insurers that hesitate could very well get left behind and fail to capture future generations of younger policyholders, who are more likely to engage via digital channels."
Almost half of the survey respondents (49%) 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 also reveals nearly all respondents (94%) expect distribution to be the area where digital technologies have the greatest impact over the next five years.
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 consumers of their products and services.
"In Asia, having a deep understanding of the customer and the market is key. A single solution and strategy may not work across all markets. For instance in China, Chinese consumers are very comfortable transacting on mobile devices hence having a strong mobile offering that leverages leading local platforms including WeChat is expected, along with fulfillment capabilities.
"How an incumbent engages, differentiates, and grows through digital channels in a market such as China is also more complex. On the contrary, in Indonesia where there is a large unbanked population, and intermittent wireless connectivity, the digital offering will look very different. As a result, we stress the importance of insurers having a clear digital vision and strategy at the regional and local level," said Chen.
In the next two years, insurers say web and mobile delivery channels (77%) are the digital technologies they expect to have the biggest impact on the sector, while they anticipate big data, automation, robo-advice and sensors to emerge in importance over the next five years.
Insurers also recognise the challenge and opportunity to leverage digitalisation to create operational efficiencies throughout the business that will not only manage cost but also streamline processes to enhance customer experience. "The tools emerging are often so far removed from insurers' previous experience that external innovation models are likely to be the only way of expanding digital capabilities. This is expected to lead to a wave of new M&A activity in the years to come," said Chen.
Respondents said developing data and analytic tools are a key part of broadening their innovation, with many carriers claiming to have already made substantial progress in this area. Nine in 10 have explored how to gather more information directly from their existing customers; eight in 10 are leveraging social network data, and more than half (53%) are looking to mine publicly available data in new ways.
In terms of digitally disrupting the industry, 45% of insurers believe they will be the most likely to do so in the years ahead, while the same number project start-up companies to have the biggest impact. However, just 8% see new entrants from the technology sector, such as Google and Facebook, as likely to disrupt their marketplace.
About the Survey
In 2016, Willis Towers Watson and Mergermarket surveyed 200 senior-level executives within the insurance industry to map the changing attitude of insurers to digital technologies and to examine the extent to which companies are using M&A strategies to realize their ambitions. The survey identifies where insurers see the biggest holes in their digital capabilities and reveals how they plan to close those gaps. Some 42% of those surveyed work predominantly in the life sector; 42% work in the property & casualty sector, and 16% work in the health sector. The companies involved were split equally across the Americas, Asia and EMEA regions.
About Willis Towers Watson
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 39,000 employees in more than 120 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas – the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.
Source: Willis Towers Watson
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