Technology has got insurers shaking in their boots, as research out today shows many are worried technology-focused startups will snatch their business out from under them.
The report by professional services firm PwC discovered that almost half (48 per cent) of insurers are concerned that as much as a fifth of their business could be swiped away by newer fintech-style companies over the next five years.
An especially anxious one in ten (10 per cent) think that the rise of technology in insurance could steal between 41 per cent and 60 per cent of their business.
In particular, insurers are concerned that the rapid growth of startups will put increased pressure of margins, with three-quarters (73 per cent) of insurance executives surveyed highlighting this as a concern, and result in loss of market share, with more than two-thirds (69 per cent) citing this.
Insurers' minds are likely made more uneasy by the amount of investment the so-called insurtech industry has been attracting as of late. According to PwC, annual investment in such firms has increased fivefold over the past three years, with $3.4bn (£2.4bn) of funding being poured into the sector since 2010.
"Insurtech will be a game changer for those who choose to embrace it," said Stephen O’Hearn, global insurance leader at PwC. "Insurers have unrivalled access to consumer data and using cutting edge technology to thoroughly analyse it could result in significant benefits for both the company and the man on the street."
However, established insurers are showing signs that they won't go down without a fight, with over two-thirds (68 per cent) revealing that they have taken steps to address how the growth of fintech could affect their company.
"Insurers need to encourage a culture of innovation and creativity within their organisations to ensure that the progress being made is not squandered," remarked O'Hearn. "There is a risk of missing an opportunity to deliver customers a similar experience to one they already receive from retail and technology companies. One size simply does not fit all in insurance anymore and, by working alongside insurtech companies, companies can begin to reposition themselves at the cutting edge of customer interaction."
Jonathan Howe, UK insurance leader at PwC, added:
The differences between start-ups and incumbents should be embraced as both are vital to the future of the industry. If the long-term mindset and experience of insurance companies can successfully be partnered with the creativity and agility of start-up companies, the industry as a whole will make progress in solving problems and bringing truly innovative products to market.