KEY POINTS

  • The global insurance industry is huge, and the US market is the largest by far. Global insurance premiums reached $4.6 trillion in 2015, and the US had the largest share — $1.4 trillion — of that figure. But it has been especially slow to modernize, even when compared to other financial services industries. This is largely due to historically high barriers to entry and the cautious nature of the industry.
  • The insurance industry is made up of three main segments. These are brokers, or distributors, which interact with clients; insurers, which perform the operational tasks such as underwriting and claims processing; and reinsurers, which insure the insurers. 
  • Consumer expectations around insurance products and the companies that provide them have changed. Consumers now expect slick digital experiences and the ability to access highly personalized products on demand. They also expect to be able to contact providers whenever and however they like.
  • This has created an opportunity for a group of firms known as insurtechs. These startups are leveraging new technology and a better understanding of consumer expectations to increase efficiencies in the insurance industry. Some are helping incumbents deliver better end products, while others are directly competing with legacy players.
    • For now, the opportunity is biggest in the US and Europe. That's because these regions have large, very mature insurance industries. China has a highly active insurtech population, but the significant differences in the age and structure of the insurance industry there put it beyond the scope of this report. 
    • Insurtechs are mostly targeting retail customers. This includes small businesses and is likely because these customers have simpler insurance needs than large commercial clients. As a result, they tend to have less well-developed relationships with their insurers and brokers, making the retail space more attractive for insurtechs. 
  • Brokers are most at risk of disruption. This is because insurtechs can easily replicate their services and are solving historical industry problems faster than legacy players. Insurtechs are more likely to offer services that help insurers and reinsurers improve their processes and better serve customers. 
  • Legacy players are also innovating. In particular, insurers and reinsurers are investing in insurtechs and fintechs working with relevant technologies. They are aiming to improve their own products and services to meet any competitive threat insurtechs might present, as well as find ways to reduce [...]