Many insurance industry executives see complex regulatory requirements as the biggest barrier toward adopting digital technology, according to a recent Willis Towers Watson survey finding that 42 percent hold this view.
The report was released on Jan. 13, days before President Donald Trump assumed office in a win fueled, in part, by his promise to overhaul and reduce regulation on a broad scale in order to promote business growth.
In the report, Willis Towers Watson said that regulatory restrictions and other issues have kept pressure off insurers to adopt digital technology more quickly.
“With challenges such as complex regulation, high capital requirements and relatively low returns on equity in some sectors, non-financial services businesses have focused on other areas other than insurance, so there hasn’t been a penalty on insurers for adapting slowly,” Gary Williams, leader of the global development of Willis Towers Watson’s business management and customer management activities in the insurance sector, said in the report.
The Willis Towers Watson report goes on to note that “even among those insurers that do expect technology companies to move into the marketplace, the majority of such initiatives are predicted to be partnerships with incumbents.”
Still, this slower adoption of digital technologies has left insurers well behind their financial services peers, Willis Towers Watson said. Beyond regulations, the consulting firm’s report also blames “reluctance and reticence,” but added insurers will need to adjust and adapt more quickly in the months ahead.
Just 1 percent of property/casualty insurers in the survey said that they were significantly ahead of other financial services sectors in terms of adopting digital technologies. Six percent said insurance companies were “moderately ahead,” and 40 percent replied that P/C insurance was about on par with other financial sectors.
Behind or Significantly Behind
A majority of P/C insurer respondents—53 percent—said that their industry was either moderately behind or significantly behind other financial services sectors in terms of getting on the digital technology bandwagon.
The Willis Towers Watson/Mergermarket report is based on a survey of 200 senior level insurance industry executives. About 42 percent came from the P/C sector and 42 percent were from various life insurers. The remaining 16 percent came from health insurers. Respondents were from the Americas, Asia and EMEA regions.
Here are some of the other report findings:
- Firms see the need to move fast and transform themselves digitally, band they are using internal R&D, internal and external venture arms, partnerships, M&A and more to get there.
- 32 percent said the long lead time to commercialize new technologies is a big obstacle to the adoption of digital tech in insurance.
- 32 percent blame customer resistance to preventing quicker adoption of digital tech.
- 17 percent of P/C companies in the survey said they don’t have a chief digital officer and aren’t considering one. Approximately 35 percent lack a chief digital officer but are considering one. Almost have of P/C insurer respondents said they have a dedicated chief digital officer.
- 45 percent of respondents said startups will be the most likely disruptors in the insurance sector, but the same number said insurance firms themselves will fill that role. Eight percent see technology firms such as Google and Facebook as being the disruptors for insurers.
- 62 percent of respondents who see Google/Facebook as being insurance industry disruptors said they see partnerships with insurance firms as extending insurers’ distribution capabilities.
- A whopping 94 percent of insurers said they see digital technologies most affecting distribution over the next five years. About 65 percent said the change would happen in two years. Approximately 53 percent said they see policy servicing and record keeping as being affected most by digital tech within the next 2-5 years.
Source: Willis Towers Watson