Wednesday 2nd August 2017. Sydney, Australia. Australia’s insurance sector faces an uncertain future as insurers continue to feel the heat of competition from local and global InsurTechs. Insurers are also struggling to leverage data analytics and overcome the constraints of legacy systems, says the latest Insurance Industry Report, released today by TAS.
The report found that 1 in 2 industry leaders are concerned about the rapid rate of change in the sector due to disruptive innovation. The burning question for the industry is not when to innovate, but how to innovate and adapt to disruption, with 20 per cent of leaders indicating this as the biggest challenge they face in the year ahead.
According to the report, incumbents are experiencing a sink-or-swim mentality, with leaders acknowledging that they need to keep up, but expressing uncertainty about how to best do this. For close to a quarter of leaders (21 per cent), the second major change impacting the sector in the year ahead is market consolidation, with ongoing movement and M&A activity set to continue to shake up the industry.
For close to a third of leaders interviewed, legacy systems pose the biggest risk to business success and are seen to be holding companies back from embracing innovations such as telematics, Big Data and robotics. Leaders are further challenged by the industry’s negative reputation (22 per cent); tech-led disruption (22 per cent); and the rate of new market entrants (11 per cent).
Maintaining margins and remaining cost-competitive are also keeping 27 per cent of leaders awake at night, while 20 per cent of insurers are concerned about client retention. For 1 in 3 leaders, embracing an innovative culture will help to drive an enhanced focus on the customer moving forward.
Leaders are displaying signs of confidence around innovation, with 9 in 10 leaders placing innovation high on the boardroom agenda. Of the leaders championing innovation, more than half are focused on internally-led innovation, with disruptive new technologies paving the way for more streamlined operations.
Leveraging disruptive technology was identified as the biggest business driver for the year ahead (22 per cent). This was followed by forging more strategic partnerships (19 per cent); reviewing internal operations and procedures (19 per cent); and adopting a more customer-focused sales and marketing approach (15 per cent).
In terms of investment, 61 per cent of leaders reported an increase in spending for the year ahead, while the remaining 49 per cent reported either no change, or a reduction in spending. The areas in which insurers are investing most include: internal training and development; strategic partnerships with InsurTechs; and new technologies. However, it seems that not enough investment is being channeled into innovation and technology for the sector to really make transformational changes in the near term, as championing this needs to come from the top.
Shane Baker, CEO, TAS says, “Australia’s insurance industry is at a tipping point driven by disruptive technology and innovation. Insurers are concerned about the outlook and how best to adapt quickly rather than be left behind. Until now, insurers have felt that regulation would protect them from disruptive market forces – but that is no longer the case. In the year ahead, we will see further consolidation. The insurers who prosper will be those who get behind innovation, drive strategic partnerships with InsurTechs and challenge themselves to continually innovate and better service customers.”
The report, conducted by TAS, canvasses the views of Australia’s insurance leaders. It draws on in-depth interviews held between February and June 2017, with 50 leaders from a broad range of private and publicly listed companies. The report serves as an independent pulse-check of Australia’s insurance industry. This inaugural report features exclusive insights from Scott Walchek, CEO of global on-demand insurance platform, Trov, and expert analysis from RFi Group. The findings of the report will be discussed today at a panel event featuring Sally Loane, CEO, FSC Council; Shane Baker, CEO, TAS; and Brenton Charnley, Founder, InsurTech Sydney. ~ENDS
About TAS: TAS is a leading provider of technology services to the Australian financial services market. TAS has been in operation since 1989 and is Australian-owned and operated. TAS has gained extensive experience in delivering the highest levels of availability, compliance and quality of service through many years of servicing one on the most highly regulated industries – Banking and Finance. They have delivered high-level services to over 50 financial institution customers.
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