But, Gartner says insurance sector chief information officers need to expand their market insight concerning the innovation and disruption potential of insurance technology start-ups (insurtechs) to complement their digital insurance strategies.
The anaslyst firm also warns that insurance CIOs who are planning to partner with insurtechs need to be aware of the risks.
"Not all of them will survive," says Juergen Weiss, managing vice-president at Gartner.
Weiss was speaking at Gartner’s Symposium/ITxpo on the Gold Coast on Monday and said insurtechs could stimulate or accelerate innovation among incumbent industry players and complement existing digital insurance strategies.
"Gartner has seen a growing interest among insurance business and IT leaders in collaborating with insurtechs or making them part of their overall innovation policies, but the research has also found that most insurance CIOs are not familiar with these companies or their value propositions.
“We advise CIOs to identify areas where insurtechs could complement their digital insurance strategies, and evaluate potential collaboration or investments."
According to Gartner’s research, 64% of the world's 25 largest insurance companies have already invested directly or indirectly via their venture capital arms in insurtech start-ups, while the number of technology start-ups in the insurance industry has more than doubled globally during the last three years.
The research reveals that digital customer engagement, mobile insurance management and analytics are the most common technology focus areas of insurtechs.
Around 60% of insurtechs have been founded within the last three years, and two-thirds of them have their headquarters in the US. EMEA is the second-most important region for insurtechs, with 27% having their headquarters there, mainly in Germany and the UK.
In the Asia region, countries such as Singapore and China (mainly Hong Kong and Shanghai) have begun to promote the development of a local insurtech ecosystem, Gartner says.
Digitalisation is one of the top priorities for insurance CIOs, according to Gartner, but the vast majority of insurance CIOs are still struggling to progress their digital strategies.
In fact, the research indicates that only 12% of insurance business and IT leaders consider their organisations to be digitally progressive, while the majority believe that their organisations are digital beginners or intermediate, at best.
Reasons for this, says Gartner, include a lack of agility caused by legacy IT systems, flat IT budgets and a lack of the right skills or the delivery models to support innovative business models.
"Collaborating with insurtechs, or at least evaluating them, could therefore provide a number of potential benefits for insurers," Weiss says.
According to Gartner, insurers have six main options to capitalise on the opportunities that insurtechs provide:
1. Partner (for example, Axa partnering with BlaBlaCar for carsharing)
2. Acquire, that is, purchase the intellectual assets and hire all resources of an insurtech
3. Purchase (like one would buy technology from an incumbent vendor such as SAP)
4. Invest (obtain a minority or majority share, either directly or indirectly, via a VC arm, such as Allianz's investment in Simplesurance).
5. Incubate (for example, let insurtechs compete to get into a startup accelerator; mentor them; and give them a space to work and exchange ideas).
6. Insure the operations or assets of insurtechs.