Collaborations with InsurTechs Could Benefit Insurance Companies

Saying it expects partnerships between traditional insurance companies and InsurTechs to increase, Fitch Ratings said successful collaborations with InsurTechs could allow insurance companies to adopt the latest technology more quickly, reduce expenses, improve distribution, and enhance customer retention.

"We believe the success of these partnerships will play an important role in the future market position of insurance companies," the rating agency said in a recent statement.

Fitch said it expects technology-based innovation and digital-first insurance sector solutions to intensify competition from noninsurers such as tech companies.

"Moreover, due to the technological changes that facilitate more ubiquitous access to information, we expect market demand to shift towards the quality of the product rather than the familiarity of well-known insurance brands," the Fitch statement said. "This poses a threat to traditional insurance companies that rely heavily on brand loyalty and heritage to maintain their competitive edge."

Fitch noted that the emergence of InsurTechs creates a regulatory gray zone, as not all InsurTech activities are regulated currently. The resulting regulatory interpretation risk could discourage some capital providers, the rating agency suggested. However, as financial services regulators prioritize technological innovation, greater regulatory clarity should emerge around InsurTechs, Fitch said.