Global InsurTech Report – 2017
Insurance’s new normal
Driving innovation with
InsurTech
45%
of respondents currently
partner with InsurTech
68%
of participants expect to
adopt blockchain as part
of an in-production system
by 2018
94%
of respondents are
prioritising better risk
insights and customer
engagement
[Link]/fintech
2 PwC Global InsurTech Report – 2017
Key messages
Foreword 3
Insurers are going beyond disruption 4
Prioritising better risk insights and customer 5
engagement
Analytics and mobile focused, but emerging tech 6
on the horizon
InsurTech is no longer seen The need for better risk Insurers are investing in key
Insurance is primed for blockchain adoption 7
as disruption, but rather a insights and customer technologies, such as data
Challenges can lead to opportunities 8 transformative force engagement is driving the analytics and mobile, that will
transformation support this transformation
Final thoughts 9
Participant profile and DeNovo 10
Contacts 11
Emerging technologies, such Blockchain is more familiar Insurers and InsurTech are
as RPA, AI and IoT are coming and a majority of insurers collaborating to overcome
to the fore expect to have use cases in industry challenges
production by 2018
3 PwC Global InsurTech Report – 2017
Foreword
The pace of change in the Financial Services industry is accelerating, and while the insurance
world won’t change overnight, many have begun to look outside their own organisations in order
to respond to challenges and take opportunities. New products and services are developing
which meet the needs of an expanding and changing customer base. Costs will begin to decrease
as new ways of doing business evolve and emerging technologies, such as artificial intelligence
(AI) and the Internet of Things (IoT), not only provide customers with a better experience, but
also streamline back office operations. InsurTech is reshaping the insurance industry. Previously
viewed as a disruptive force, it is now driving innovation across the sector.
The insights in this report are based on the responses of 189 senior Insurance Sector executives
from 40 countries who participated in PwC’s Global FinTech Survey 2017. With an editorial board
made up of specialists from around the world we complemented the report with our own insights
and analysis into how InsurTech and Insurance are moving closer together and how insurance is
innovating in response to InsurTech. The report is also fuelled by proprietary research from PwC’s
DeNovo, focused on InsurTech innovation and its impact on business.
Stephen O’Hearn Jonathan Howe
Global Insurance Leader Global InsurTech Leader New products and services are developing which
PwC Switzerland PwC UK
meet the needs of an expanding and changing
customer base.
4 PwC Global InsurTech Report – 2017
Insurers are going
beyond disruption
In 2016, the insurance sector was in the midst of the FinTech
Figure 1: Percentage of revenues at risk to InsurTech companies
revolution, with InsurTech disruption on the mind of 74% of
insurers. Today, while most respondents still see business as What percentage of your business (in terms of revenue) is at risk of being lost to standalone FinTech companies within the next five years?
being at risk, InsurTech is becoming more widely understood
and accepted. Gaining a better understanding of InsurTech has 2016 2017
led the majority of respondents (56%) to estimate between 1%
and 20% of revenues being at risk (see Figure 1). 0% 81%–100% 1%
In fact, insurers are taking a more proactive approach to seize
0% 61%–80% 3%
the opportunities offered by InsurTech, with 52% putting
disruption at the heart of their strategy.
10% 41%–60% 6%
Additionally, insurers are the most active among Financial
Institutions when monitoring FinTech in order to respond 22% 21%–40% 20%
competitively and are increasingly partnering with innovators
(45% in 2017, versus 28% last year). Partnering can assist 48% 1%–20% 56%
incumbents to meet changing customer needs and target new
segments, for example, pay as you use insurance. Source: PwC Global FinTech Survey 2017, Insurance Sector Participants
New innovations will also enhance incumbents’ operations,
such as the use of artificial intelligence (AI) to improve efficiency
by automating existing customer-facing underwriting and claim
processes.
“I believe startups will drive this disruption and will
be integrated into either tech companies or traditional
institutions.”
Head of Innovation of a large Asian Insurance company
5 PwC Global InsurTech Report – 2017
“I believe InsurTech will have repercussions across
the entire insurance industry, both consumer and
commercial aspects – startups will find ways of
undertaking processes and services in a better manner
than incumbents.”
CEO of a large Asian Insurance Company
Prioritising better
risk insights and
customer engagement
Insurers’ focus has shifted to become more customer centric.
Figure 2: Insurance innovation trends
In line with last year, customer engagement and the generation
of better risk insights are identified as the most important Please rate the degree to which these InsurTech trends will be important for the insurance industry over the next five years
innovation trends by 94% of respondents (see Figure 2).
The size of the bubbles is proportional to the number of related FinTech companies as assessed by the DeNovo platform
Current InsurTech value propositions reflect these innovation
trends. With market players focusing on Internet of Things (IoT) 1. Increased sophistication of data models and analytics to better identify
Very important
startups and solutions that leverage data usage and monitoring, and quantify risk
new tools are being developed that will help companies align 2. Increased sophistication in methods to reach, engage and serve
with customers’ needs as they change from protective to 1 customers in a highly-targeted manner
preventative models. Alongside this shift, InsurTech companies 3. Rise of aggregators to compare products and services from different
providers
are focusing on specific microsegments and developing products 2
Level of importance
4. Consolidation of “as-a-service” solutions enabling outsourcing of core
to reach them. The growth of specific products on demand (e.g. insurance functions
pay as you use) and P2P models highlight this trend. 5. Emergence of connected cars and autonomous vehicles impacting auto
claim frequency and severity
Prioritising customer engagement will ensure products are
intuitive, easy to use and accessible. According to respondents, 3
Moderately important
as only 16% and 25% of their customers currently engage with
them through mobile and website, there is ample room to boost 5 4
digital interactions. As participants expect these channels will
be used by 81% and 90% of their clients in the coming years,
insurers will need to focus their investments on connectivity
and mobility.
Slightly likely Very Likely
InsurTech companies are in a strong position to develop new Likelihood to respond to the trend
products, drive market innovation, and help incumbents remain
Source: PwC Global FinTech Survey 2017, Insurance Sector Participants and DeNovo
relevant to changing customer demands.
6 PwC Global InsurTech Report – 2017
Analytics and
mobile focused,
but emerging tech
on the horizon
Consistent with the trends highlighted for the industry, insurers
Figure 3: Relevant areas of technological investment over the next 12 months
plan to heavily invest in data analytics and mobile technologies
to ensure better risk insights and customer engagement models. What are the most relevant technologies for your business that you plan to invest in within the next 12 months?
Alongside this they are beginning to look at emerging technologies
such as AI and and robotics process automation (RPA) for short
term investment (see Figure 3). RPA is already being used in
back office operations to connect previously disparate systems.
AI is streamlining simple claims and underwriting decisions,
leaving experienced professionals free to work on more
judgment based decisions.
Compared to the broader Financial Services industry, insurers
have chosen to prioritise IoT (22%) over blockchain (8%),
whereas it is almost the inverse for the banking industry where
12% 11%
blockchain is prioritised by 25% of respondents and IoT by 8%
8%. Such a focus on IoT highlights the industry shift from a 84% 58% 34% 33% 33% 22%
reactive model to a more preventative risk management model
leveraging available data. IoT offers vast amounts of data in
real time, changing the way insurers will interact with their
customers and manage risks to limit losses.
Data analytics Mobile Robotics Artificial Cyber-security Internet of Public cloud Biometrics Distributed
process intelligence things infrastructure and identity ledger
automation (AI) (IoT) management technologies
(RPA) (e.g. “blockchain”)
Source: PwC Global FinTech Survey 2017, Insurance Sector Participants
7 PwC Global InsurTech Report – 2017
Insurance is primed
for blockchain
adoption
Blockchain is increasingly attracting the attention of
Figure 4: Cumulative blockchain adoption in insurance
participants. They are realising the competitive advantage that
this technology could bring to the design of new products and What timeframe do you most likely expect your organisation to adopt blockchain as part of an in production system/process?
services with increased transparency, security and efficiency.
While last year only 17% of insurance participants recognised n Insurance
blockchain as a very important innovation trend, half are now n All financial services 100%
99%
exploring the technology in-house or are in the process of
participating in some blockchain initiatives.
86%
Going forward, a widespread adoption of blockchain technology 68%
77% 79%
is anticipated in the insurance industry, with 68% of participants
expected to adopt blockchain as part of an in-production 69%
system or process by 2018 (see Figure 4). This emphasises the
importance of the technology and its many use cases, including: 57%
(1) automated claims processes, which will deliver benefits
to the customer while reducing costs; (2) streamlining data
collection and payments, which can provide better visibility
and controls for underwriting; and (3) the aggregation and 20%
allocation of catastrophe risks or losses which would allow for
better monitoring, understanding, and transparency of exposure 2% 21%
and claims processes. 2%
2016 2017 2018 2019 2020 2021
Source: PwC Global FinTech Survey 2017, Insurance Sector Participants
8 PwC Global InsurTech Report – 2017
Challenges can lead
to opportunities
Investing in InsurTech related projects can be an opportunity With InsurTech’s spread across the sector, regulators and
Figure 5: Challenges the insurance industry faces in their
for insurers to expand their products and services, increase policy makers have begun to focus on these developments.
ability to innovate
their customer base, and leverage their analytical capabilities. For example, there is growing concern in Europe surrounding
Curiously, incumbents responded that they expect to see a 13% the unintended consequences that come from an over-reliance
return on investment (ROI) on these projects, substantially on data analytics, such as higher risk policyholders being priced
lower than the 20% expected by the overall Financial Services out due to more accurate information.
industry. We wonder if these more modest expectations, closer
to product pricing expectations, reflect the mainstreaming of Further concern regards new data privacy rules, such as the
innovation investment throughout the insurance sector. General Data Protection Regulation (GDPR), and the possible
conflict with innovative digital strategies. Much of this is yet
Talent is a key issue for insurers, with 87% having trouble in to be tested, and while the full force of GDPR is still largely
hiring and, even more so, retaining people with the right skillset conceptual, insurers should be aware of the possible implications
to innovate (see Figure 5). In fact, 38% find it very difficult to do to their digital strategy.
so, compared to 28% of respondents from the banking sector.
Insurers can attract talent by acquiring from startups, partnering As InsurTech grows, we are also seeing a rapid rise in RegTech,
with innovators, and fostering internal talent. However, most with organisations increasingly looking at technology that can 87% 63% 53% 45% 43%
companies will need an updated staffing model in order to help them address these regulatory and compliance obligations
develop their talent accordingly. more efficiently and effectively. There are numerous existing
pain points in regulatory functions where RegTech can help,
IT security is also a pressing concern when taking into from client onboarding and compliance monitoring to regulatory
consideration the increase of consumer and risk data. Acquiring reporting and fraud prevention. While the banking industry is
Talent Data storage, IT security Digital identity New business
or partnering with InsurTech companies can mean that perhaps ahead when it comes to their interaction with RegTech privacy and authentication model
traditional insurers’ legacy IT systems are introduced to new companies, it is likely that insurers will follow due to the cost protection regulations regulations
exposures and risks as they are integrated with new, often and headcount savings that RegTech can provide. regulations
cloud-based platforms.
Source: PwC Global FinTech Survey 2017, Insurance Sector Participants
9 PwC Global InsurTech Report – 2017
“We’ll see traditional Financial Institutions recognise they can’t move as quickly as
large tech and either invest more heavily in acquiring startups or partner with them
to drive change.”
Head of Products of a large North American Insurance Company
Final thoughts
Effective innovation programs depend more on an organisations’
Figure 6: Changes expected in innovation sources Figure 7: Insurers ability to co-create with innovators
innovation processes, tools and culture than on how much is
spent on R&D. An excessive internal focus and silo mentality, What changes do you expect to see in your sources of innovation over the next Percentage of incumbents who rate their ability to co-create with innovators as
caused by minimal contact between business units, will often 3-5 years? good and very good
weaken innovation capabilities. The question is then: how to
ensure innovation adds value to your company? Traditional 1% 1% 3% 4% 7%
insurers should continue monitoring the InsurTech landscape,
16% 17%
comprehending how it affects the market and focusing on
relevant innovations. Ultimately, for insurers, it’s no longer a
question of whether or not they are involved with InsurTech, 42%
rather it is about how they leverage the InsurTech ecosystem.
52%
Insurers see their potential sources of innovation coming from
64%
partnering with InsurTech companies and through internal
efforts (see Figure 6). While the majority of insurers see their
company as good at generating ideas, only 17% state they are
confident in creating products with innovators (see Figure 7).
Insurers should not fall behind other sectors such as Asset &
Wealth Management and Banking & Capital Markets that are
significantly more confident (30%) in this area.
Fundamentally, incumbents need to decide how to leverage
their own incubators and accelerators in relation to InsurTech.
Whether by acquiring or partnering with innovators or serving
as a source of experimentation for innovators, capitalising 84% 82% 55% 43% 29% 17% 30% 30%
on their brand and large customer base is the InsurTech
opportunity. In the end, no matter the source of innovation, FinTech Internal Other FinTech Other
partnerships efforts partnerships acquisitions acquisitions Insurance Asset & Wealth Banking & Capital
insurers need to ask themselves how they mainstream it into Management Markets
legacy cultures unaccustomed to the speed and agility
n Increase n Stay the same n Decrease
of InsurTech. Source: PwC Global FinTech Survey 2017, Insurance, AWM and
Source: PwC Global FinTech Survey 2017, Insurance Sector Participants BCM Sector Participants
10 PwC Global InsurTech Report – 2017
Participant profile
and DeNovo
The 2017 Global FinTech survey was based on the responses of The current report is based on the responses of 189 insurance DeNovo
1,308 participants, principally chief executive officers (CEOs), companies from 40 countries around the globe. DeNovo serves as the digital front door on innovation to PwC’s
directors /department heads, heads of IT/digital/technology, Financial Services practice, providing on-demand consulting
and other top management involved in strategy and innovation delivered by experts in innovation within financial services and
from 71 countries and across six regions. emerging technology
DeNovo is a self-serve platform with access to PwC’s specialists.
Figure 8: Origin of participants, Insurance sector Figure 9: Type of respondents, Insurance sector Use DeNovo to understand what innovation is happening, where
in your value chain it is occurring, how to leverage technologies
n Africa 2% n CEO 17% and trends, and which companies are doing the innovating. You
n Asia 36% nH
ead of IT/Digital/Technology 17% can ask questions, get practical answers, and better understand
n Europe 40% n Director/Head of department 14% how innovation is impacting your business. DeNovo makes
n Latin America 9% n CFO 8% innovation practical.
n North America 10% nH
ead of strategy 7%
n Oceania 3% n COO 6%
nH
ead of innovation 5%
n CDO/Business development 4%
n CRO/Risk manager 2%
n Head of products 2%
n Other 18%
Source: PwC Global FinTech Survey, Insurance Sector Participants Source: PwC Global FinTech Survey, Insurance Sector Participants
Try DeNovo for free, or upgrade to DeNovo
Premium for deeper strategic analysis and direct
access to specialists.
11 PwC Global InsurTech Report – 2017
Contacts
Stephen O’Hearn Simon Copley Pauline Adam-Kalfon Paul Mitchell
Global Leader, Insurance Partner – Client Service Director FinTech Leader
Partner PwC Hong Kong PwC France Director
PwC Switzerland +852 2289 2988 +33 1 56 57 83 72 PwC South Africa
+41 44 628 0188 [Link]@[Link] [Link]-kalfon@[Link] +27 21 529 2001
[Link]@[Link] [Link]@[Link]
Steve Davies Manoj Kashyap
Jonathan Howe EMEA FinTech Leader Global FinTech Leader Dean Nicolacakis
Global InsurTech Leader Partner Partner US FinTech Co-Leader
Partner PwC UK PwC US Principal
PwC UK +44 131 260 4129 +91 226 669 1888 PwC US
+44 (0) 20 7212 5507 [Link]@[Link] [Link]@[Link] +1 (415) 498-7075
[Link]@[Link] [Link]@[Link]
Leslie G. Fenton Gero Matouschek
Henri Arslanian Managing Director EMEA FS Digital Transformation and Insurance John Shipman
Hong Kong and China FinTech Leader Director Strategy & Digital Asia-Pac FinTech Leader
Director PwC US Partner Partner
PwC Hong Kong +1 (312) 298-5866 PwC, Strategy & PwC Australia
+852 2289 2490 [Link]@[Link] PwC Germany +61 8266 0198
[Link]@[Link] +49 89 54525 634 [Link]@[Link]
Scott Fergusson
[Link]@[Link]
Javier Baixas X-LoS Insurance leader Yuan Yao
InsurTech Leader Partner Paul McDonnell Global Insurance Data & Analytics Leader
Director PwC Australia Global Insurance Advisory Partner
PwC Spain +61 2 8266 7857 Partner PwC China/Hong Kong
+34 91 568 4400 [Link]@[Link] PwC US +86(21) 2323 3084
[Link]@[Link] +1 (203) 470-1772 [Link]@[Link]
Haskell Garfinkel
[Link]@[Link]
Allan Buitendag US FinTech Co-Leader Jamie Yoder
Insurance Leader Partner Insurance Advisory Leader
Partner PwC US Partner
PwC Canada +1 (415) 298 2647 PwC US
+1 416 815 5239 [Link]@[Link] +1 773 255 2138
[Link]@[Link] [Link]@[Link]
For queries about the data within this report, please contact Grégory Weber on +352 49 48 48 6175 or [Link]@[Link].
[Link]/fintech
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