The global insurtech market is forecast to grow at a compound annual growth rate of more than 10% between 2016 and 2020, according to a new report from global technology research and advisory company Technavio.
The market research report, titled Global Insurtech Market 2016-2020, covers the present scenario and growth prospects of the global insurtech market for the five-year period, Technavio said in a press release on Thursday. To calculate the market size, the report considered investments made in insurtech platforms in the Americas, Asia Pacific region and Europe, the Middle East and Africa.
In the report, Technavio analysts highlighted three factors that are contributing to the growth of the global insurtech market: growth of Internet-based business ecosystems, rationalization of transaction processes and increased need for customer satisfaction.
Regarding the first factor, Technavio said in the release that many top banks and insurance companies are expected to enhance their offerings or develop strategic partnerships with financial technology innovators to provide innovative payment solutions to customers. The advances and innovations in technologies and different financial, technological platforms have also increased the customers’ need for better online experiences. “Many top banks, card issuers, app developers, [and] insurance companies face heavy competition to reach the leading position and grow their footprints in the market,” the release said.
“The competition among different market participants is expected to intensify during the forecast period with the rise in the use of smartphone users for entering the online space,” Amit Sharma, a lead analyst at Technavio, said in the release. “International players are expected to grow during the forecast period through various M&A. As these start-ups attract more users and media coverage, investors are eagerly waiting for the next-generation disruptive challengers.”
In addition, the payment systems are showing significant changes in the past two decades. Due to the emergence of several technologies about the payment systems, the transaction process became easier for the insurance companies. For instance, electronic payment systems are widely used by the insurance companies. As well, the integration is expected to evolve in the payment system, the release added. The evolution of payment systems is predicted to grow further during the forecast period. Many insurance companies are likely to invest significant amount toward the adoption of advanced technologies, which is enhancing their functionality of payment systems.
“Due to the rise in several cyberattacks and security threats over the last five years, many insurance firms started to spend a significant amount of time and money towards technological risk management systems to identify, manage, optimize and mitigate risk,” added Sharma.
Regarding the increased need for customer satisfaction, the report pointed to the rise in the aging Baby Boomer population and the emergence of Generation Y, or Millenials, which has resulted in opportunities across a range of insurtech products. “With the emergence of Generation Y, who have high disposable incomes and are in the process of acquiring assets, there is a need not only for insurance security support, but personalized services,” the report said. “The aging of the population is a prominent driver taking shape in the developed countries. This factor coupled with the high penetration for insurance firm’s results in higher demand for insurtech products like life insurance and retirement product plans.”
The release noted that several venture capital firms are also investing in insurtech start-ups, leveraging the power of software to promote different insurance products and other portfolio management tasks. “These start-ups are set up with a goal to disrupt the less technologically-savvy corporations,” the release said. “The use of big data and powerful analytics tools have led to investment opportunities and strategies. These opportunities and strategies were available only to high-net-worth individuals with access to insurance services. These were earlier available on smartphone devices with a reach to all.”
According to IT research and advisory company Gartner, Inc., insurtechs, or insurance technology startups, are technology companies that are in their early stages of operation; that drive specific innovation across the insurance value chain by leveraging new technologies, user interfaces, business processes or business models; and that leverage different forms of funding, including, but not limited to, venture capital.