Survey: Insurance Firms Have Sights Set on Startups

By Casey Houser
Contributing Writer

Global management consulting company Accenture (News - Alert) recently announced the results of its latest research which shows optimism on the part of insurance companies moving into the next three years.

Accenture's research, “Accenture Digital Innovation Survey 2014: Seizing the Opportunities of Digital Transformation,” surveyed 141 insurance companies in 21 countries. Overall, the research found, respectively, that 59 percent, 47 percent, 43 percent and 38 percent of those companies expected their competitors to acquire digital insurance, telematics, insurance price comparison, and analytics startups by 2017.

The ball is already rolling, Accenture suggests, because 43 percent of respondents said their companies had already acquired startups or were likely to get one in the near future. The focus on startups here is clear: The possible coming flood of acquisitions marks a belief that digital media will change the insurance landscape for the better.

John Cusano, senior managing director of Accenture's global insurance practice, commented on that idea and the capability of up-and-coming brands to keep insurance companies on the cutting edge.

“Insurers realize that digital technology will transform the way they operate, and we believe that the industry is entering an unprecedented period of change, which will lead to totally new products, services and business models,” Cusano said. “Select acquisitions can enable insurers to keep up with technological change, and are a sign that digital has become a board-level issue.”

Regarding the specific value of what insurance companies expect to spend, property and casualty insurers showed researchers that they would spend an average of $47 million on digital investments in the next three years. Their life insurance counterparts expect to spend $40 million in that same time period. The caveat, however, is that insurance companies do not appear to have clear goals in mind. In large part, Accenture describes insurance companies' ventures in the realm of acquisitions as “exploratory.” Sixty percent of companies indicated that their digital investments were “exploratory” while only 22 percent described their investments as focused on driving innovations.

Ultimately, this appears to boil down to a lack of infrastructure on the part of traditional insurance companies. While startups may have new technologies on their side, nearly half of survey respondents here said they were hampered by legacy systems, and nearly another third said they lacked the right skills to properly follow through with digital investments.

Accenture points out that, for insurance companies to truly innovate, they need to do more than release a digital version of an existing product or service. Jean-Francois Gasc, a managing director for insurance with Accenture Strategy, says enterprises need a change in mindset that allows them to place customers first. In short, they need to think from customers' points of view.

The research shows that insurance companies have begun to invest in all sort of digital products—from mobile communications and applications to social media monitoring. A change in mindset, however, is not something that can be purchased with digital technologies or acquired with a startup. It requires employee training, exposure to new ideas, and technological advances all at once. It is possible that enterprises' intentions to invest heavily in digital through the next three years will tip the scales in favor of the customers, but only time will tell.