Australia's insurance sector is not properly preparing itself to innovate for the future, with fewer than half of insurance companies adopting a formal innovation strategy, according to KPMG.
In a recent KPMG global survey and report – titled A new world of opportunity: The insurance innovation imperative – it was found that although 83 per cent of insurance firms acknowledge that innovation and success are interrelated, only 43 per cent of Australian respondents have an innovation budget.
“Rapid innovation has created significant challenges for insurers, with 48 per cent saying that their organisations are already experiencing disruption from new, more nimble competitors,” KPMG head of insurance Martin Blake said.
“The insurance industry will need to lift its game if it wants to increase innovation and fend off disruptors.”
The report found that Australian insurers’ growth strategies are focused on “enhancing existing products and services”. It also found that Australian firms are more likely to grow as a result of focusing on new customers with existing products, rather than through developing new products.
“The insurance industry seems caught in the innovator’s dilemma – much of the focus is on expanding products for existing customers or marketing current products to new customers,” Mr Blake said.
“Organisations will need to navigate their own path through this new world of opportunity, developing new business and operating models and new partnerships in order to out-compete and out-innovate their peers and bold new entrants.”
Compared with their global counterparts, however, Australian insurers saw more opportunities in digital technology.
Over the past five years, Australian firms were more likely to have implemented cultural change programs, internal crowdsourcing and employee competitions to source ideas.
"While many respondents collaborate with other companies and have partnerships with academics or other industries, many also look internally for ideas," said Mr Blake.
The KPMG survey recorded responses from 280 insurance firms across 20 countries.