Global banking executives fear that up to a quarter of consumer banking and payments business could be at risk within 5 years from emerging fintech firms. The impact of digital technology and the digital consumer is transforming the way consumers access financial products and services. Beyond simple transactions, such as checking balances, the intersection of finance and technology (fintech) is impacting virtually all categories of financial services at an increasing rate, reshaping the industry's status quo. Technology-focused start-ups and new market entrants are reshaping the banking, payments, insurance and wealth management sectors through innovation and a consumer-focused digital mentality. The impact, according to an analysis of companies included on PwC's DeNovo platform, is that funding of fintech start-ups more than doubled in 2015 reaching $12.2bn, up from $5.6bn in 2014.
December is the perfect month to predict the key insurtech trends for the year to come and to think of New Year's resolutions: what specific trends to tap into to enhance the digital strategies. We believe these trends should relate to what an insurance carrier would like to accomplish, to what a'winning insurance firm of the future' would look like. We believe that that such winning insurance firms will have four essential elements. Fast changing customer behaviour and new market dynamics make it essential for insurance carriers to increase the contact frequency and provide more added value in these contacts. Fortunately, connectivity, all sorts of connected devices offer an unprecedented entry in customers' daily life. Adding value is about solving the real problem. People don't want a mortgage; they want a nice house to live in. Insurance is usually just part of a solution, but rarely the entire solution to the real problem a customer is facing.
Technology spending in the global insurance industry is estimated to be around $189 billion. By 2019, the spending industry is expected to reach $205 billion. The IT spending ratio of insurance companies as a percentage of premiums has not changed to a great extent. Insurance companies currently spend about 3.8% of their direct written premium on information technology. The average spending by insurance companies has comparatively reduced in the last four years.
The insurance industry, after the trade market, is another sector where it is hard to predict the next big paradigm shift. Given the tentative stability and natural catastrophes, insurance companies often stand on a trembling ground and confront massive challenges, even when it comes to adopting seamless and intuitive digital solutions such as Artificial Intelligence in Insurance. According to PwC's 20th CEO survey conducted in 39 countries, the greatest concerns that loom over the 95 CEOs of the insurance sector today are the subdued premium rate, mild interest rates, shifting consumer behavior, slow economic growth, need for regulations and technological innovations and blazing market competition. Let's delve into the idea of introducing artificial intelligence in insurance, and how it impacts the current legacy processes. This shows how the insurance industry is struggling to comprehend and leverage digital advancements.
The insurance is on the brink of a major disruption and insurance companies are very much aware of that. According to a survey conducted by PwC, three in four insurers predict disruption of their business over the next five years. Insurtech is the fintech sub-segment addressing existing insurance challenges and opportunities. Singapore, in particular, is quickly becoming a hotbed for insurtech in Asia. The Monetary Authority of Singapore (MAS) is working with the British Government (UKTI) and 15 insurance industry representatives including Aviva, AXA, AIA, IAG, Allianz, Etiqa and InsurTechAsia to promote digital innovation in the insurance sector in Singapore and Southeast Asia.