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Fintech is increasingly disrupting financial businesses that have existed for decades. Some companies are embracing this trend, while others are resisting it.
Insurance companies, however, are afraid of it.
PwC released a report this week that revealed 90% of insurers fear losing at least part of their business to standalone fintech companies, and approximately half of that 90% believe they could lose up to 20% of their business. The report surveyed 79 executives at worldwide insurance companies.
Part of this stems from increased investment in "insurtech," new technologies that are disrupting the legacy insurance industry. Investment in insurtech startups has increased fivefold since 2013, and cumulative funding since 2010 has hit $3.4 billion, according to PwC.
And legacy insurance companies have good reason to be afraid because these insurtech companies are creating solutions that would affect every portion of the insurance value chain: Underwriting: Insurtechs could more accurately assess risk than incumbents because they collect data from a wider pool of sources and have more sophisticated analytics capabilities.
Pricing: Insurtechs having granular data from IoT devices, such as sensors in cars and wearable fitness bands, that let them provide customized pricing plans that appeal to consumers who demand flexible pricing options.
Customer acquisition: Similar the wealth management field, automated advisory can work for insurance policies, which would reduce or eliminate the need for agents. We’ve entered the most profound era of change for financial services companies since the 1970s brought us index mutual funds, discount brokers, and ATMs.No firm is immune from the coming disruption and every company must have a strategy to harness the powerful advantages of the new fintech revolution.The battle already underway will create surprising winners and […]
