Large insurers providers will struggle to combat the threat posed by a new wave of agile startups, despite increasing the size of digital teams across their organisations, according to Forrester Research.
As the insurance sector emerges as the next industry to be disrupted by digital technology, startup firms such as Friendsurance, Oscar, Kroodle, Metromile and PolicyGenius will increase the level of competition seen by the current industry leaders, according to Forrester's ‘Predictions 2015: Venture Investments Will Spur Digital Insurance Innovation’ report.
“Traditional agent-based insurance firms will continue to lose ground to more dynamic businesses that “get” digital,” writes report author and Forrester Research principal analyst, Ellen Carney.
“Dozens of software-based startups...are attacking market segments they see as ripe for disruption, where there are high margins, inefficiencies, unmet customer needs, or new ways to deliver simpler, cheaper, and better services.”
Carney added that non-traditional players such as tech firms will also move more aggressively into the space in the next 12 months, putting further pressure on current market leaders.
“Insurance is luring technology giants like Google and Facebook looking to exploit their customer relationships and Insurance eBusiness teams will be on the hook in 2015 to deliver compelling customer experiences quickly, meaning that they’ll need to partner strategically to plug knowledge, technology, or skills gaps,” she said.
However, there are signs that the large insurance firms are increasing investments in digital technologies, including promoting ‘digitally–savvy’ executives to senior positions.
For example, Aviva this year hired Andrew Brem as chief digital officer, reporting directly to the firm’s CEO, a trend that is set to continue. Attracting and retaining key staff such as data scientists will be a challenge though, if employees believe they can advance digital careers faster in other sectors.
Forrester Research also predicts that investments in mobile and telematics will continue, as large firms seek to gain access to new data sources. “By the end of 2015, partnerships with third-parties like banks, real estate brokers, and cable companies will uncover new sources of value through connected car, home, and life insurance products and services.”