M&A in insurance technology is expected to increase as insurance firms place a bigger importance on product and distribution technology capabilities, concludes consulting firm Towers Watson. The increased emphasis on modern technology is the result of a global move that offers consumers support in comparing financial products to make the best choice.
Professional services firm Towers Watson, in cooperation with intelligence provider Mergermarket, recently released a new survey report on insurers’ merger and acquisition (M&A) intentions: ‘Ready for takeoff: The outlook for insurance M&A in EMEA 2014’. For this report, Mergermarket surveyed 264 senior insurance executives from life, property & casualty (P&C) and composite insurers as well as reinsurers. The respondents were asked for their outlook for M&A in the insurance sector in the EMEA (Europe, the Middle East and Africa) region, and the plans and strategy of their own company.
The survey shows that competition among European insurers for attractive technology assets is set to intensify as a result of greater importance given to product and distribution technology capabilities in M&A strategies. The respondents indicated that the availability of modern technology platforms in particular is seen as a key driver of valuations for P&C personal lines businesses, and 41% of the P&C senior insurance executives rated ‘digital distribution’ as the most attractive channel for acquisition in the next three years. Several respondents stated their expectation to widen their M&A scope in the future to potentially acquire specialist technology providers that “could enhance their business prospects.” According to the consulting firm, this emphasis on technology solutions is characteristic for a global move to support consumers in comparing and choosing their own financial products.
Commenting on the outcome of the report, Andy Staudt, M&A Leader EMEA P&C Insurance at Towers Watson, says: “We view the importance of digital distribution as part of the move to a more technology focused insurance business model. New technology platforms can be developed internally by companies but given the high levels of investment required to implement some of these initiatives and the development time involved, our respondents expect to see major insurance companies acquiring some of these capabilities from smaller niche providers. This could lead to a high level of competition for these targets, as well as the growth of new technology-led businesses that develop solutions aimed at the insurer market.”