Insurance firms expect to acquire digital start-ups to give them a competitive edge

But many acquisitions are just 'exploratory', and a fifth of firms are yet to put together a digital strategy at all

The majority (59 per cent) of insurance executives expect that their rival firms will make acquisitions of digital insurance start-ups over the next three years to better position themselves in "a digital world", research from Accenture claims

Accenture surveyed 141 insurers in 21 countries, and found that 43 per cent of insurers surveyed had already acquired start-ups or are planning to do so in the near future. Along with digital start-ups, telematics companies (47 per cent of those surveyed), insurance price comparison websites (43 per cent) and analytics firms (38 per cent) are the other most cited acquisition targets.

According to the survey, three-quarters of insurers believe that digital will transform their industry within the next five years. Property and casualty (P&C) insurers, who are planning to spend an average of $47m (£30m) in digital investments over the next three years, expect their company's digital initiatives to increase premium income by five per cent over the next three years, and life insurers, who plan to invest an average of $40m (£25.5m) over three years, expect an increase of seven per cent.

"Select acquisitions can enable insurers to keep up with technological change, and are a sign that digital has become a board-level issue," said John Cusano, senior managing director of Accenture's global Insurance practice.

However, the survey also found that 60 per cent of insurers viewed their investments in digital as "exploratory", compared with only 22 per cent of respondents who believe that investments made by their organisation are focused on driving truly disruptive innovations.

When insurers were asked what hampered the execution of their digital strategy, the most common responses were legacy systems (42 per cent) and lack of the right skills (30 per cent).

In addition, 21 per cent of insurers said they didn't have a digital strategy in place, while nearly a third (32 per cent) said they had implemented a digital strategy but limited it to either sales and distribution or to customer interaction processes. Less than half of the firms said that they had a digital strategy in place that covered the entire value chain.

Jean-François Gasc, managing director for insurance within Accenture Strategy, warned insurers not to fall into the trap of "simply digitising existing channels by creating upgraded, digital or mobile-friendly versions of existing products and services".

He said that executives needed to have a different mindset.

"Insurers need to fundamentally change their business models to become digital businesses that are truly customer-centric and that provide consumers with solutions rather than just products," he suggested.

Meanwhile, many insurers (72 per cent) have formed or are planning to form new distribution partnerships. Of those that intend to do so, more than two-thirds (69 per cent) are considering partnering with banks, while nearly half (44 per cent) could partner with tech firms like Google or Facebook.