At the end of 2019 we reviewed reports published by major consulting companies: PwC, Deloitte and Accenture about the insurance industry in order to understand key industry trends and their impact on InsurTech startups. We paid particular attention to industry growth and technology investment trends. Below you can find a summary of our research.
1. The positive impact of InsurTech solutions is becoming more recognized
The consulting company PriceWaterhouseCoopers conducted an annual CEO survey of insurance industry leaders in 2019. One of the take-always from the survey this year was that insurance leaders have lost most of their initial nervousness about InsurTech and have started to view technology as a positive driver of change for their organizations.
What type of InsurTech platform each insurance company will invest in depends primarily on company size. Smaller companies normally look for “insurance in a box” solutions. While for larger companies technology is at the forefront of their business therefore they look for more customized solutions and are not interested in one size fits all solutions.
2. The budgets for InsurTech solutions at insurance companies are growing
In 2019 the biggest proportion of the IT budgets at insurance companies was spent on maintaining legacy systems. However, the proportion of IT budgets spent on IsurTech applications has been growing.
Overall technology budgets in the insurance industry have been growing significantly for several years. In the annual Global CIO Survey conducted by Delloite in 2017 the insurance industry ranked highest based on the percent of survey participants (59%) who said that their IT budgets had increased from the previous year.
3. Funding for InsurTech startups is growing, but not coming from insurance companies
InsurTech funding hit record levels in 2019 even before the years had finished. However, insurance companies provided only 25 percent of the investments in the InsurTech sector in the first half of 2019. This is due to the fact that most insurance companies unfortunately continue to treat InsurTech startups as outside vendors rather than business partners.
4. Blockchain technology is expected to grow in significance
The consulting company Accenture conducted a survey of insurance company leaders about their views about the technologies that will have the most impact on the industry now and in three years. Cloud based technologies to improve efficiency (63%) and data analytic (50%) ranked highest on the list of technologies that insurance executives believe have the biggest impact at this point in time. However, consumer-facing blockchain (53%) and internal blockchain applications (50%) are expected to have the biggest impact on the industry in three years.
5. Growth rate of insurance premiums remains healthy, which creates growth opportunities for both insurance companies and IsurTech statups.
The consulting company Deloitte has estimated the growth rate of insurance premiums in 2019 and 2020 in both Advanced and Emerging markets. Nonlife premiums are expected to grow by 1.8% in Advanced markets and by 7.0% in Emerging markets. While life premiums are expected to grow by 1.2% in Advanced markets and an astonishing 8.7% in Emerging markets. The healthy growth in insurance premiums worldwide creates good business development opportunities for both insurance companies and InsurTech startups.