Impact of Disruptive Entrants in the Insurance Industry in Singapore - Study by Matthias de Ferrieres

Statement of the problem
​•Unlike other industries, insurance is digitally changing but resists to digital established disruptions despite the emergence of start-ups that attempt to transform the conservative ecosystem (Pain, 2014),
•Insurtechs deploy new value propositions and operating models to facilitate product comparison, simplify processes, and reduce the cost of purchase (Barinskiy, 2020),
•Insurtechs are powerful drivers for change, pressing incumbents and traditional distribution channels to modernize their business model, organization and governance, but
•Historical leaders remain ahead on all indicators such as revenue, presence, market share, brand awareness and insured reliability (Nicoletti, 2016), and
•Insurtechs face difficulties to penetrate sustainably the insurance market and make a difference for the customer.

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Rational of the statement
​•The insurance market is complex and unlike insurtechs, incumbents have been in the market for a long time, (advantage: regulatory expertise and field experience, legacy systems and robust governance for stability and scalability, products and services that help to preserve a strong ground on the market, and appropriate distribution channel),
•Customer remains conservative and prefer to buy with the support of a traditional intermediary,
•Insurtechs focus on digital solutions rather than offline and have difficulties to create true perceived value through their innovative solutions and do not appeal to consumers that prefer to stay with incumbents,
•Traditional insurance players understood the importance of digitalizing their business and the necessity to transform their organization but they do it in an orderly manner, so
•Incumbents are considered better than new entrants at security and fraud protection, at products and services, and brand awareness from a customer point of view (Browne, 2017), and
•The penetration of e-commerce through new start-ups is less in insurance than in other industries (Pain 2014), which makes it difficult for insurtechs to create economic value and sustain. 

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Significance of the research area
​•There are publications that show the appetite for insurance players to modernize themselves, to change the customer perception and transform the industry by embracing new technologies,
•I found no research pointing to the difficulties that incumbents in general, new entrants in particular have to truly disrupt the insurance ecosystem, and
•I also found no study explaining why incumbents stay leaders of their markets and what are or could be the key success factors of the new entrants to transform the insurance market.
•The insurance industry has notable barriers to entry (e.g., regulations, capital requirements, insurance know how and consumer behaviors) that make it complex to enter and even more difficult to stay.
•The purpose of the study is to evaluate the competences that may be required from a new entrant willing to remodel successfully the insurance industry on a long term.
•The research assesses the importance of both the experience and expertise in insurance to respond to powerful incumbents, stiff regulations, and conservative purchasing behavior.

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The Questions
​1.Is the insurance industry digital transformation slowed down by its regulation?
2.Is the insurance industry digital disruption delayed by poor value perception from the consumer?
3.Is being tech savvy sufficient for an entrepreneur to disrupt the insurance industry?

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Assumptions
​•The insurance environment is complicated at both supply and demand level and requires a minimum of know-how,
•On the supply side, the industry deals with a complex and volatile regulation. Insurance suppliers must allocate significant time and budget to have the right resources and the appropriate organization to remain compliant, and
•The demand is conventional and the purchasing behavior is conservative. Customers need to be constantly educated, advised, and supported in their insurance acquisition journey as their value perception is poor and the willingness to pay is low.
•The insurance industry requires from players time and energy,  significant expertise, insurance experience to respond to these complex environment, yet
•New Entrants are young, innovative and tech-savvy entrepreneurs but miss such requirement, while
•Incumbents have the advantage to get what it takes (governance, expertise and experience, systems, distribution channels) to stay put and ahead of being disrupted.

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Conclusions
•The Insurance Industry is going under a technological transformation with multiple new entrants, called insurtechs, deploying innovative solutions and incumbents digitalizing their organization,
•Insurtechs are made of young and tech savvy entrepreneurs that are insurance inexperienced, and believe that:
•Insurance proficiency is not critical to succeed, and
•New technologies should challenge the classical and traditional customer journey.
•Traditional players digitalization strategy is slower, less agile, less innovative but takes into consideration the necessity:
•To stay compliant and keep an insurance mindset,
•To digitalize rather than revolutionize their distribution channels, and
•To prioritize in-house solutions and internal digital mutations rather than partner with external providers or insurtechs.
•Meanwhile insurance remains a conservative, complex, and technical industry despite digital advent:
•The value perception remains low and the willingness to pay for insurance poor,
•Consumers still prefer to buy insurance face-to-face rather than online. Prospects may search for information and compare online, but still opt for the expertise of an insurance intermediary to purchase, and
•Digital platforms do not replace the human touch that is required to explain, support, pamper, and accompany customers in purchasing cycle.
•Such dynamic reduces space for new entrants and delays external disruption as Insurtechs are considered as digital enablers rather than alternatives to incumbents, and
•Insurtechs are unable to:
•Develop differentiating value proposition that appeal to the consumer,
•Make themselves economically scalable and sustainable, and
•Influence and transform the insurance ecosystem.

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