Trends in the Austrian insurance market

The Austrian insurance market is an important consumer of software and IT services. PAC currently observes two major trends in the Austrian insurance market: embedded insurance and sustainability.

Embedded insurance

Embedded insurance is integrated into product and service offerings that can be taken out on demand, for example when buying a cell phone. Due to changing consumer behavior (e.g. sharing models, short-term and long-term rentals, as well as leasing), the approach offers a dynamic, flexible, and easy way to digitally create an all-round package for customers from tailored products. InsurTechs in particular have been developing an ecosystem with API-driven platforms. This enables companies from all industries to seamlessly integrate customizable and needs-based insurance into their processes and offers.

An example is the Germany-based InsurTech hepster, which entered the Austrian market in 2020 and has become a rising star in digital insurance products, especially in micro-mobility (focusing on bicycle and e-bike insurance). hepster is expanding in every conceivable direction: geographically, through various sales channels and cooperations, with insurance products and conditions, and, on top of that, with services for the insurance industry.

Another example is HDI and wefox unifying the processes for car insurance applications by means of OMDS 3.0, an insurance infrastructure for data exchange. The interface enables HDI to access wefox's partner portal. These uniform and standardized business processes are intended to simplify the cooperation between insurance companies and sales partners.

From PAC's point of view, embedded insurance products are a challenge for insurers' IT, as current legacy IT systems often have to meet flexible standards. To provide new products such as embedded insurance, and to shorten time to market, a stable and, above all, flexible IT infrastructure is critical, including fast and secure data processing, with a potential technological connection to third-party ecosystems and more. Currently, however, monolithic core insurance systems and a lack of standards are slowing down digitalization in many insurance companies.

Sustainability in the insurance industry

Nowadays, more and more customers expect insurance companies to promote sustainable behavior. For example, sustainability can be factored into premium calculations. Likewise, the insurance market is challenged as its customers expect transparency and comprehensibility.

Insurers, like other companies, are under unprecedented pressure to act on environmental issues as expectations from stakeholders such as customers, employees, investors, and regulators (e.g. the Green Deal, new standards (taxonomy), and country-specific regulations) are high. That means insurers do have an impact on sustainability (for example, through the energy efficiency of their operations). UNIQA provides an example of an internal measure: In its 2021 sustainability report, the insurance company lists five fields of action to become more sustainable in terms of energy. One action is monitoring energy to further minimize energy and resource consumption through targeted measures, validated and based on data.

In PAC’s opinion, sustainability will be one of the future differentiators for businesses. PAC recommends that insurance companies start by gaining a holistic view of the current status quo of sustainability within their business. In concrete terms, this means that data needs to be presented in a structured way using predefined KPIs. This is where software and IT service providers come in. With their process consulting and data management expertise, IT services companies can help their clients transition from strategy to action. One of the greatest challenges for insurance companies is the lack of tools to identify, track, and evaluate their corporate carbon footprint along business processes. External partners can help extract and collate this data from the system and use it to derive insights. External analytics and data management teams can help by connecting and integrating data sources and metrics, internal data management, and external disclosures to various regulations.