There is no disputing the importance of technology for an insurer. But while delivering to changing customer and channel expectations takes priority, they must accelerate modernisation and digitalisation initiatives at a pace which often surpasses what their own internal efforts can deliver. Given that technology innovation is not their core focus, insurers will increasingly partner with specialists in the field to bring value at the speed required.
Most established insurers are faced with disruptive new entrants who have designed their business for more digital-centric client requirements. Most of those new entrants are as much technology companies as they are insurers. Because the in-house technology teams of the insurance incumbents have significant legacy systems, data, and processes to worry about, they cannot compete with these types of insurtech companies on an equal footing.
Insurers are therefore turning their attention to forming alliances with technology companies capable of augmenting their own capabilities. Consumers are the main drivers behind this as they are looking for more digital engagement options and experiences especially during the initial phases of the insurance journey.
The competencies of an insurer lie in developing products, understanding actuarial models, risk and pricing, and the needs of customers. In addition, their access to customer bases and distribution channels are their true strength and what they need to continue to drive to stay ahead. In a way it comes down to leveraging this legacy as a competitive advantage. Insurtechs simply do not have the history and scale that customers often look for in an insurer. This gives larger, more established players an advantage. But this alone is not enough. It needs to be accessible in a more modern way. Partnering with a skilled technology company unlocks this potential.
This approach only works if the insurer identifies the technology competencies they are lacking or looking to build. An insurer needs a partner that brings this value to the business and shares similar values and understanding. While a technology company might have a strong understanding of IT and use it to develop their own offering, they might not fully understand the requirements of an insurance business.
This brings with it a risk of misalignment between the insurer and the technology partner. It is therefore critical to find a company that can bridge that gap. Furthermore, the internal team at the insurer might feel threatened by the partnership as this could potentially circumvent them. The insurer needs to integrate this partnership into their way of working and not just deal with it as a typical supplier type engagement.
These partnerships empower insurers to become more digital and address more sophisticated demands of consumers, at a more rapid pace. And yet, despite this potential, many financial services companies tend to be secretive and not collaborate. Many believe that they can deliver to these requirements on their own, which may be the case, but it is all about the speed at which it can be done, and how quickly one can adapt as the world continues to change.
Events of 2020 and the pressure to digitalise have opened more insurers up to the potential of alliances. This will also assist in accelerating the digitalisation journey that includes further innovation such as intelligent automation and robotic processing. The incumbents must now equip themselves to embrace technology more readily through such partnerships so they can compete in 2021 and beyond.