Insurance sector CIOs need to expand their market insight concerning the innovation and disruption potential of insurance technology startups (insurtechs) to complement their digital insurance strategies, according to Gartner.
According to Gartner research, 64 percent of the world’s 25 largest insurance companies have already invested directly or indirectly via their venture capital arms in insurtech startups.
Gartner predicts that 80 percent of life and property & casualty (P&C) insurers worldwide will partner with or acquire insurtechs to secure their competitive positions by the end of 2018.
Juergen Weiss, managing vice president at Gartner, said insurtechs can stimulate or accelerate innovation among incumbent industry players and complement existing digital insurance strategies.
“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 the research has also found that most insurance CIOs are not familiar with these companies or their value propositions,” said Mr. Weiss. We advise CIOs to identify areas where insurtechs could complement their digital insurance strategies, and evaluate potential collaboration or investments.”
Gartner defines insurtechs as technology companies (1) that are in their early stages of operation; (2) that drive specific innovation across the insurance value chain by leveraging new technologies, user interfaces, business processes or business models; and (3) that leverage different forms of funding, including, but not limited to, venture capital.
The number of technology startups in the insurance industry has more than doubled globally during the last three years, according to Gartner analysis of the sector conducted in the second quarter of 2016. Digital customer engagement, mobile insurance management and analytics are the most common technology focus areas of insurtechs.
Sixty percent of insurtechs have been founded within the last three years, and two-thirds of them have their headquarters in the U.S. EMEA is the second-most important region for insurtechs, with 27 percent having their headquarters there, mainly in Germany and the U.K. In Asia, countries such as Singapore and China (mainly Hong Kong and Shanghai) have begun to promote the development of a local insurtech ecosystem.
Digitalization is one of the top priorities for insurance CIOs, according to Gartner surveys. However, the vast majority of insurance CIOs are still struggling to progress their digital strategies.
Gartner’s research indicates that only 12 percent of insurance business and IT leaders consider their organizations to be digitally progressive, while the majority believe that their organizations are digital beginners or intermediate, at best. Reasons for this include a lack of agility caused by legacy IT systems, flat IT budgets and a lack of the right skills or the delivery models to support innovative business models.