Insurance firms can no longer rely on their brand names to retain customers and should offer instant, flexible and digital quotes, a leading data analytics company has said.
In a report published today, GlobalData highlights an emerging trend of start-ups offering on-demand policies that allow customers to buy insurance by the hour, day or week.
Variations can be seen across both commercial and personal lines, such as home and gadget insurance that can be adjusted at any time, usually through a provider's app.
And these companies are increasingly attractive to investors, with global InsurTech funding surpassing $3bn (£2.5bn) in 2018, an increase of 84.2% on the previous year.
"Established players have to adapt to progress made by start-ups or consumers will begin to go elsewhere," said Ben Carey-Evans, insurance analyst at GlobalData.
"They can no longer rely on their trusted brand names as they are not just competing against start-ups, but can be left behind by their competitors partnering or investing in them."
How global InsurTech investment has changed since 2014 is shown below ($millions):
The report reveals how UK InsurTechs received the second-highest level of investment globally last year, attracting $9.8bn from 101 completed deals.
And the rise of start-ups has prompted traditional insurers such as Aviva to respond with its Aviva Plus, which allows customers to tweak their policies during a contract.
This comes after separate research found that InsurTech is set to generate over $400bn worth of premiums worldwide by 2023, more than double the estimated $187bn in 2018.
The researchers also predicted that artificial intelligence for claims would lead to a five-fold increase in annual savings, exceeding $1.2bn across property, health, life and motor insurance.
Carey-Evans said that the insurance sector has lagged behind others when it comes to embracing technology, but that the threat of start-ups is not going away.
"The digital challenge in insurance continues to grow and the scale of funding in 2018 is proof of that," she added.
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