Partnerships between traditional insurance firms and insurtechs are set to rise and will play an important role in the future market position of insurers, ratings agency Fitch says.

Technological changes that facilitate “more ubiquitous access to information” will shift market demand towards the quality of the product “rather than the familiarity of well-known insurance brands,” a report from Fitch says.

"This poses a threat to traditional insurance companies that rely heavily on brand loyalty and heritage to maintain their competitive edge,” it said.

Collaboration with insurtechs enables insurers to adopt the latest technology more quickly and improve their distribution reach and customer retention. The success of such partnerships will see more emerge, Fitch says.

“These will be in the form of direct investments or collaborations,” Fitch said.

“A successful collaboration will enable insurance companies to quickly adopt the latest technology, increase companies’ profitability by reducing operating expenses, diversify insurers’ distribution channels and products, and improve customer experience and retention.”

It expects technology-based innovation and digital-first solutions in the insurance sector will intensify competition from non-insurers, such as tech companies, especially where they have access to concentrated market shares.

Fitch also expects more clarity in regulatory frameworks to address a current “grey zone” as financial services watchdogs prioritise technological innovations.