• New Roland Berger study analyzed 250 InsurTechs around the world and lays out the most important strategic issues surrounding digitization
• Global investments in InsurTech startups have risen continually over the past five years to USD 600 m in 2016 and the volume is only set to rise further
• Analysis shows that startups with a background in artificial intelligence, smart sensors and data analytics have the greatest potential to disrupt the traditional insurance landscape
• In order to strengthen their own market position, insurance companies have to push ahead with digitization. InsurTechs should be seen as an opportunity. They can be valuable role models, cooperation partners or acquisition targets

Munich, June 28, 2017

Do innovative and agile InsurTechs pose an existential threat to incumbent insurers? What business models are the newcomers already applying successfully? Which ones are rapidly approaching market readiness? And which have the greatest potential to radically transform the industry? These are among the questions surrounding digitization in the insurance context answered by the new Roland Berger study "Copy them? Work with them? Or buy them? – InsurTechs and the digitization of insurance". Roland Berger investigated 250 InsurTechs around the world. Workshops with representatives of the health, life and non-life segments and a thorough analysis of the InsurTech community laid the foundation for their assessment.

Insurance in transition

"In any industry, the emergence of startups is a telling indication that huge changes lie ahead for the value chain. More than USD 600 million in investments went into InsurTech startups around the world in 2016, and the volume is only set to rise further," says Urs Arbter, Partner and insurance expert at Roland Berger in Zurich. Innovative InsurTechs are tackling the same issues as insurers. They highlight the development options open to established business models and provide input for fresh ideas. "InsurTechs have the advantage of being largely free from traditions and legacy structures. They are also acting on the basis of DNA that is digital through and through," affirms Urs Arbter. The analysis of 250 InsurTechs shows very clearly that startups with a background in artificial intelligence, smart sensors and data analytics have the greatest potential to disrupt the traditional insurance landscape.

InsurTechs as sparring partners

The study authors maintain that the time has now come for insurance companies to develop and implement digitization strategies that are tailored to their own organizations. "Insurance companies need to get serious about digitization. We believe that FinTechs hold particularly strong potential for the insurance industry. At the moment these startups are seen as a huge threat," says Urs Arbter, "but we foresee them serving as useful cooperation partners, role models or acquisition targets."

According to the Roland Berger experts, cooperation represents an option for both parties to fully exploit the benefits. If an InsurTech is unwilling to cooperate, there is still the option of buying in technologies and skills. In such cases, however, the management of the incumbent firm needs to be aware that rapid integration may be counterproductive. Even the most sophisticated digital strategy will fail if the organization behind it is ill-prepared for the associated (culture) change. "The company needs to have digital expertise embedded in the organization and accepted in the cultural mindset," adds Arbter.

Digital options: Four roads lead to the same goal

The experts spell out how incumbent players can maintain their competitive edge going forward by drawing on their genuine strengths, adopting new business models – or combining the two. In the context of optimizing existing business models, insurers have the option to invest either in increasing process efficiency or in improving the customer experience. When developing new business models, the options include making more intensive use of smart analytics or occupying new digital ecosystems. "How many digitization initiatives are launched and their precise nature depends above all on the size of the insurance company and its sphere of activity," says Arbter.

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