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Insurers fear losing margins, market share to fintech start-ups

SINGAPORE — Incumbent insurers find it challenging to reinvent their businesses to cope with industry changes, including the rise of fintech start-ups, as these new players threaten to erode their margins and market shares, two surveys released yesterday showed.

SINGAPORE — Incumbent insurers find it challenging to reinvent their businesses to cope with industry changes, including the rise of fintech start-ups, as these new players threaten to erode their margins and market shares, two surveys released yesterday showed.

A report by business consultancy PwC, which surveyed management staff from 79 insurance and start-up companies across the world, found that 48 per cent of insurers fear that up to 20 per cent of their business could be lost to standalone fintech companies within the next five years. Some 73 per cent of the respondents said there would be pressure on margins and 69 per cent highlighted the potential loss of market share as fintech gains greater prominence in the insurance industry.

“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,” said Mr Stephen O’Hearn, PwC’s global insurance leader.

The report said venture capitalists are watching insurtech start-ups dedicated to reinventing the way people buy insurance, how insurers manage risk, and creating solutions to new needs. It said annual investments in such start-ups have increased five-fold over the past three years, with cumulative funding reaching US$3.4 billion (S$4.6 billion) since 2010.

While insurers recognise the need to address challenges and opportunities presented by fintech, some see IT security as the biggest barrier to working alongside start-up companies. On the other hand, start-ups cite “difference in management and culture” as the biggest challenge.

“Insurtech will be a game changer for those who choose to embrace it. 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,” said Mr O’Hearn.

A separate report by business consultancy KPMG found that only half of the more than 70 insurance executives polled believe their organisations can cope with economic, demographic and technological changes in the industry. About 57 per cent admitted that their transformation efforts to date have been less than ideal. The report added that insurers may be placing more focus on the implications of regulatory policy instead of changes in customer preferences and needs.

“As customers become more educated and sophisticated, their expectations of how they want insurance services and products to be delivered will change. Insurers will need to bear that in mind to look at how their offerings can be more customer-centric,” said Mr Lau Kam Yuen, head of insurance at KPMG Singapore.

PwC Singapore’s insurance leader Woo Shea Leen said Singapore is well placed to leverage the potential of insurtech given the Government’s support for fintech, the existing infrastructure and tech-savvy population.

“If the long-term mindset and experience of insurance companies can be partnered successfully with the creativity and agility of start-ups, the industry as a whole stands to gain and as it brings truly innovative and relevant products to the market,” said Ms Woo.

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