Digitalisation drives new M&A wave

Having lagged behind their financial services peers in adopting digital technologies due to regulations, reluctance and cost, a survey by Willis Towers Watson in conjunction with Mergermarket finds an increasing number of insurers now regard investment in digitalisation a priority.

Findings from the survey shows that almost three-quarters of insurers (74 percent) believe the insurance sector has failed to show leadership in digital innovation. Cost is a major challenge with respondents blaming the length of time required to commercialise new technologies (32 percent) and the size of investment required to transform (24 percent).

Fergal O’Shea, EMEA Life Insurance M&A Leader at Willis Towers Watson, said: “Banks have had more contact with customers, which has given them a head start. The quality and frequency of the information exchange between insurers and customers, who may simply be renewing a policy once a year, just isn’t the same.

“However, insurers recognise the importance of building a sustainable digital infrastructure to improve customer engagement and as an essential distribution channel, which is likely to be addressed through internally-driven innovation, joint ventures and M&A activity. For those that hesitate, there remains the commercial risk that they will get left behind and fail to capture future generations and younger policyholders who are more likely to engage via digital distribution.”

Almost half the respondents to this survey expect to make an acquisition over the next three years directly driven by the desire to acquire digital technologies, including 14 percent that intend to make more than one acquisition.