Inefficient insurers should expect to see their margins impacted by disruptive technology, according to a report by management consultancy Marsh & McLennan Companies.
The report said the financial services industry is set to become ‘modular’ – meaning customers can more easily cherry pick providers. It added that this will increase the pressure on insurers as new market participants increase competition.
Marsh & McLennan claim this transition will see the insurance industry ‘moving from large one-stop shops to a variety of firms competing at different points in the value chain’.
“This is a change to the whole structure of a $5.7 trillion industry. There will be sizeable shifts across the value chain and we have identified $1 trillion of revenues and costs that might be up for grabs,” it said.
Technological innovation, evolving customer expectations and tightening regulation over ownership and control of data will help to drive the trend forward, the report adds.
It warned that the value of a firm’s services will become transparent with weaknesses in product offerings and services being ‘brutally exposed’.
“Over the coming five-to-ten years a next generation of digital services will solve customer hassles, removing friction from daily lives, business and investment. These services will go far beyond the basic aggregators and apps available today,” the report predicts.