Insurers risk losing ground to tech giants
Technology giants such as Google parent company Alphabet are ramping up efforts to provide a wide range of financial services, affecting incumbent players including insurers, Moody’s Investors Service says in a new report.
The expansion is most pronounced in Asia, particularly in China where consumers have taken enthusiastically to the digital world for insurance and other financial needs.
“Provision of retail financial services in these non-bank ecosystems is well underway in Asia and emerging elsewhere, affecting incumbent banks, insurers,” the Moody’s report says.
In the ratings agency’s central scenario, incumbents will cede a portion of control over retail financial services distribution and many will look to create digital platforms or focus on market niches in response.
“In our central scenario, the greatest risk to incumbents is that consumer-facing big tech firms end up controlling a large share of customer relationships, globally, turning incumbents primarily into manufacturers,” the report says.
“Partnerships with big tech firms can accelerate efforts to be responsive to the new environment. However, incumbents also may also cede a level of control to their partners, a credit negative.”
Insurers and other incumbent financial services providers will need to step up their game and invest in building their digital strategies to stay relevant in the new landscape.
Late adopters or smaller players who continue to under-invest face the most risk.