Gartner and ACORD Joint Study Finds That Most Insurers Are Unprepared for the Coming Industry Transformation
Via Gartner Newsroom
Sep 30, 2015
STAMFORD, Conn., September 30, 2015 View All Press Releases
Most property and casualty (P&C) and life insurers underestimate the disruption coming from future industry conditions and are not prepared to respond to new threats, according to a joint survey conducted by Gartner, Inc. and ACORD.
The survey, conducted in the second quarter of 2015 by Gartner and the nonprofit insurance industry standards association ACORD of 104 insurance leaders in the U.S., Canada and the U.K., found that that most did not feel that any particular industry trend was reshaping the industry overall, but various ones had significant and moderate impact on the business.
Approximately 78 percent of those surveyed identified the need to have effective Web or e-commerce strategies as the No. 1 trend having the greatest impact on the industry. Many companies have e-commerce as a leading initiative within their digital insurance strategies and are looking to increase their touch with customers through a variety of Web strategies such as improved e-service sites, interactive websites and social media interactions.
The second industry trend projected to have the greatest impact on business strategy and vision was the greater need for cybersecurity practices and procedures, with 78 percent of respondents stating that it had a significant or moderate impact. This was followed by big data/analytics. However, there were several trends that Gartner has identified as industry-critical — including the Internet of Things (IoT), the need to create new sources of revenue, threats from nontraditional competitors and changing consumer lifestyles and behaviors — that were not viewed as having a significant impact overall. Some respondents indicated that these industry trends had no impact at all on their business strategy or vision.
"These results are risky given the disruption that the industry is experiencing and the speed of change expected over the next few years as digital insurance models continue to be implemented," said Kimberly Harris-Ferrante, vice president and distinguished analyst at Gartner. "As insurance leaders turn their attention to fulfilling digital insurance business models, they need to be keenly aware of the emerging issues around digital transactions and digital commerce. However, most are not looking at the growing threats from outside or transformational use of external data; for example, from IoT devices. This may be creating a false sense of security that results in insurers investing in incremental business model adjustments, instead of the massive transformation that will be needed to meet the emerging business needs of the insurance market during the next five years and beyond."
Additionally, few of the survey respondents identified these trends as completely reshaping the industry as a whole. Even when they felt that the trend had or would have an impact on their own business models, they did not typically view that trend as having the potential to reshape the business processes, products or the competitive landscape industrywide. The result is that their companies will be ill-prepared for new competition and new consumer requirements.
The survey results also show that there is a fundamental misalignment between consumer attitudes toward emerging competitors and the perception of those competitors as risks among insurance leaders. Insurers overestimate the reliance that consumers have on agents, brokers and traditional channels, not realizing the potential threat that new competitors represent and the power of these consumer-friendly and recognized brands.
The survey found that 53 percent of insurers believe that the most significant threat are the top five competitors in their local market.
"Having that point of view may be acceptable short-term, but awareness of the possible disruption long-term is imperative for survival. Insurers need to understand the disruption that could occur from new market entrants as they bring in new insurance offerings, represent more consumer-oriented brands, and that have higher loyalty overall," said Ms. Harris-Ferrante.
Additional information is available in the Gartner report "Insurance IT and Business Executives Are Unprepared for the Coming Industry Transformation." Additional survey results will be shared at the ACORD2015 conference on November 2 in Boca Raton, Florida.
ACORD (Association for Cooperative Operations Research and Development), founded in 1970, is a global, nonprofit organization serving the insurance and related industries. ACORD facilitates fast, accurate data exchange and more efficient workflows through the development of electronic standards, standardized forms and tools to support their use. ACORD members worldwide include hundreds of insurance and reinsurance companies, agents and brokers, software providers, financial services organizations and industry associations. ACORD maintains offices in New York and London.