Insurers need to devote more resources to disruptive innovation if they want to keep up with insurtech development, Deloitte says.

Most insurers are still focused on enhancing their legacy systems, products and business models, and are not focusing on differentiating themselves in a customer-centric economy, its report says.

Deloitte urged insurers to make fundamental changes to company strategy and operating models to foster sustainable innovation. No more than 10% of innovation resources are being spent on fundamentally changing how insurers do business. And 90% of funds are being spent on becoming more efficient.

Insurers need a systematic, sustainable approach to start, manage, implement and measure the impact of innovation, the report says.

Reinventing operating models and company culture may be daunting, and insurers are more focused on making incremental fixes and upgrades to bolster ageing infrastructure, it adds.

“Yet those we interviewed repeatedly emphasised that insurers also should start thinking and acting in a much bolder and more organised way to achieve the kind of differentiating innovation likely to be required to remain relevant, competitive, and profitable in a rapidly changing society and economy,” the report says.

It warns long-term competitive threats are looming, and these will require far more differentiating innovation. “Incremental innovations to maintain status quo systems, distribution options, and business models aren’t likely to suffice in the face of such dramatic changes in society and the economy.”

Fundamentally changing how insurers operate and provide value is becoming a make-or-break necessity, it says.

“That means most insurers can no longer afford to merely dabble in innovation.”