Only half (50%) of the Australian insurance sector believes enough is being done to maximise the value of insurtech collaborations and drive real digital innovation across the industry, according to a new report released today by Ernst & Young, Australia (EY Australia) and Insurtech Australia.
The third annual survey of Australia’s insurtech ecosystem found that partnerships between incumbent insurers and insurtechs are becoming increasingly common.
80% of insurers are currently collaborating with an insurtech – but most are still occurring on a small scale, for specific point solutions within individual pockets of the business.
To move to the next stage of optimisation and fully harness the benefits of insurtech, insurers will need a clear, holistic digital strategy and an implementation roadmap that addresses legacy technology issues.
Which areas can really benefit from insurtech?
Pivotal areas that Australian insurers, insurtechs and insurance industry providers agree are ripe for digital innovation include efficient administration, claims, pricing and underwriting agility, and developing new products to deliver differentiated customer propositions.
Andrew Parton, EY Oceania Insurtech Leader said: “While it’s pleasing to see more collaboration and partnerships occurring, most Australian insurers are still only using insurtech tactically, rather than trying to develop a more strategic whole-of-business digital ecosystem.”
“For the sector to fully realise the transformative potential of insurtech, insurers will need to move beyond random acts of digital and put the right infrastructure in place so that their legacy systems can connect with new technologies and support plug-and-play integration capabilities,” Mr Parton said.
“Over the next few years, we are likely to see the sector moving beyond simple alliance models.
In fact, our research shows that the Australian insurtech ecosystem may look quite different in three years’ time, with 58% of insurers anticipating a high level of acquisition activity as they seek to obtain their own capabilities in this space.
Fifty-eight percent of survey respondents also expect to see consolidation of insurtech providers during the same period.”
“Currently, 63% of insurers have current partnerships with between 1 and 3 insurtechs, but only 14% are partnering with 5 or more.
This will change over the next few years as insurers seek to increase their number of insurtech partnerships to broaden their digital ecosystem and extend insurtech use across their entire value chain.
Digital enablement platforms could provide a short-cut to making these connections and support the transition from old to new distribution channels, without needing to entirely replace core legacy systems,” Mr Parton said.
Rita Yates, Insurtech Australia CEO said: “It is positive to see that the majority of the industry agrees that insurtech will play a major role in helping incumbents become more digitally capable in the future, and that incumbents and insurtechs were both aligned in this level of thinking.”
“It is clear that insurtechs in Australia offer a wide range of potential solutions. We now have a real opportunity to optimise future partnerships so that their value can be realised at scale.
In order to do this, a clear understanding is needed of what elements are critical to get right during the partnership process,” Ms Yates said.