Legacy insurance sector CIOs must embrace the innovation and disruption potential of technology start-ups to complement their own digital insurance strategies, according to the latest worldwide market study by Gartner.
Sixty-four percent of the world's 25 largest insurance companies have already invested directly or indirectly -- via their venture capital arms -- in what Gartner refers to as the emerging Insurtech start-up market.
Gartner predicts that 80 percent of life, property and casualty insurers globally will partner with or acquire Insurtech companies by the end of 2018. Analysts believe that these pioneers can stimulate or accelerate innovation among incumbent industry players, and complement existing digital transformation strategies.
Insuretech Market Development Opportunities
"Gartner has seen growing interest among insurance business and IT leaders in collaborating with Insurtechs or making them part of their overall innovation policies, but most insurance CIOs are not familiar with these companies or their value propositions," said Juergen Weiss, managing vice president at Gartner.
Insurtechs are companies that are in their early stages of operation; that drive innovation across the insurance value chain by leveraging new technologies, user interfaces, business processes or business models; and that leverage different forms of funding.
According to the Gartner assessment, the number of technology start-ups in the insurance industry has more than doubled globally during the last three years. Digital customer engagement, mobile insurance management and analytics are the most common technology focus areas of Insurtechs.
Furthermore, 60 percent of Insurtech firms have been founded within just the last three years, and two-thirds of them have their headquarters in the U.S. market.
EMEA is the second-most important region for Insurtechs, with 27 percent having their headquarters there -- mainly within Germany and the UK market.
In Asia, countries such as Singapore and China -- mainly in the Hong Kong and Shanghai markets -- have begun to promote the development of a local Insurtech start-up ecosystem.
Digital Transformation Outlook for Insurers
Digitalization for top-line growth is one of the highest strategic priorities for insurance sector CEOs, according to the latest Gartner survey. However, the vast majority of CIOs in the sector are still struggling to plan and implement a substantive digital transformation agenda.
That said, only 12 percent of insurance sector senior business or IT leaders consider their organizations to be 'digitally progressive', while the vast majority believe that their organizations are digital beginners or intermediate practitioners. This scenario must change, in order to achieve desired outcomes.
Gartner reports that the top reasons include a lack of agility caused by legacy IT systems and processes, flat IT budgets within the insurance sector -- plus, a shortage of the digital transformation skills or the DevOps delivery models to create new and innovative business models.