• Consulting into the global insurance sector rises 11 per cent to $9.4bn in 2014
• At the heart of the digital threat is the sense that insurance companies are relatively easy targets for competitors
• A further 9 per cent growth in consulting work expected in 2015

Consulting into the global insurance sector grew by 11 per cent to $9.4bn in 2014. The threat of digital competitors has finally seen insurance companies embrace the possibilities presented by digitisation, and as a result, are turning to consultants for advice.

Due to this drive towards digital, technology services ($2.6bn) was in most demand globally, followed by financial management and risk ($2.48bn) and operational improvement ($2.27bn). The report from Source Information Services (Source) also reveals that consulting into the global insurance sector is the second largest in the broader $31.5bn global financial services consulting market. Insurance work was also one of the fastest growing in 2014 for consultants.

Late to the party – UK and global insurance looks for help with digital developments
In the UK, consulting into the insurance market was particularly buoyant and is now worth $684mn. With the insurance industry switching to new capital rules in a matter of weeks, Solvency II has continued to generate work, but it’s where consulting firms are supporting insurers with digital transformation, that the greatest opportunities are.

The report says that at the heart of the digital threat is the sense that insurance companies are relatively easy targets for competitors as they have been historically slower to adopt new technologies and practices.

Zoe Stumpf, Head of Qualitative Research at Source Information Services, said:
“Having held back for much longer than most other sectors, insurance companies are finally beginning to embrace the possibilities presented by digitisation. But it’s the threat of disruption rather than the opportunities to innovate on their own that is the bigger motivator here.

“New technologies such as telematics in the car insurance market - to deliver a world in which car insurance prices are determined by data gathered directly from the car - is shifting the mind-set of what is possible, and  global insurers, are needing to react fast to ensure that they are not left behind.”

Didier Bonnet, Senior VP, Global Head of Practices, Capgemini Consulting added:
“Insurance was a very conservative market a few years ago and completely fixated on regulation; some companies did studies about digitisation, but they didn’t amount to much in the way of activity. Now it’s one of the most active sectors as companies have recognised that, for some products, their business model is relatively simple and could open them up to all types of new competition.”

Customer experience driving difficult digital developments
But the Source report also says that while the model may be simple enough, the process of digitisation is not always without its difficulties. For instance, P&C insurers have a very clear need to develop their omnichannel approach, which is more difficult as they don’t usually own all their channels and are dependent on agents and brokers to manage this. Nevertheless, with an increasingly disloyal customer base that expects every online experience to be as good as the best, there’s an immediate need to act.

Nicolai Hesdorf, Country Head and Managing Director, Accenture said:
“The insurance industry’s customers are becoming less loyal than they used to be, and they’re not benchmarking their experience against other insurers, they’re benchmarking against Amazon and Facebook.”

From a global insurance sector perspective, the emerging markets are generating a lot of work for consultants: from India to Brazil, the consensus appears to be that significant opportunities exist – and those larger consulting firms with a global footprint are positioned well to prosper.

Commenting on the overall performance of the global financial services consulting market, Zoe Stumpf from Source concluded:
“Underpinning the growth are three massive drivers of consulting activity: efficiency, regulation, and digital transformation. But those are being given momentum both by the extent to which financial services clients have now pulled themselves clear of the crisis that enveloped them for so long and by what’s starting to look like an epiphany - borne out of pressure from customers, regulators, governments, and the gathering threat posed by fintech. - that they need to do things differently if they’re going to survive.”

For more information on Source reports contact alice.noyelle@sourceforconsulting.com or telephone +44 (0)20 3700 5462 or visit www.sourceforconsulting.com.