Insurers need to move beyond “random acts” of digital changes and put the right infrastructure in place to address their legacy technology issues, according to a report.
A report by Ernst & Young and Insurtech Australia found while 80% of insurers were collaborating with an insurtech, most were still on a small scale for specific point solutions within individual pockets of the business.
The repot said insurers would need a clear, holistic digital strategy and an implementation roadmap that would address legacy technology issues such as efficient administration, claims, pricing and underwriting agility, and developing new products to deliver differentiated customer propositions.
EY Oceania Insurtech leader, Andrew Parton, said: “For the sector to fully realise the transformative potential of insurtech, insurers will need to move beyond random acts of digital and put the right infrastructure in place so that their legacy systems can connect with new technologies and support plug-and-play integration capabilities.
“Over the next few years, we are likely to see the sector moving beyond simple alliance models.”
He said in three years’ time, 58% of insurers anticipated a high level of acquisition activity as they sought to obtain their own capabilities in this space and 58% of survey respondents also expected to see consolidation of insurtech providers during the same period.
“Currently, 63% of insurers have current partnerships with between one and three insurtechs, but only 14% are partnering with five or more. This will change over the next few years as insurers seek to increase their number of insurtech partnerships to broaden their digital ecosystem and extend insurtech use across their entire value chain,” he said.
“However, such innovations will rely on insurance processes being able to easily interact with external APIs, cloud-based systems, and IoT devices and sensors. Digital enablement platforms could provide a short-cut to making these connections and support the transition from old to new distribution channels, without needing to entirely replace core legacy systems.”