The insurance and reinsurance industry should expect further disruption as financial sectors with inefficient cost structures and high capital usage face threats from new entrants, business models, technology and alternative sources of risk capital, according to Oliver Wyman.
The financial services industry is becoming “modular” and sector participants and value chains are being “fundamentally reshaped,” thanks to disruptive forces such as digital distribution platforms, new product providers, outsourcing trends and alternative sources of capital, Oliver Wyman, the management consulting arm of finance, insurance, reinsurance and advisory group Marsh & McLennan Companies, said in a new report today.
The report titled ‘Modular Financial Services: The New Shape of the Industry’ looks at how the financial services sector is being generally disrupted by new business models, technology innovation (Fintech), more efficient, mobile and fungible sources of capital, as well as other factors.
“Modular financial services are emerging at different speeds across markets. Currently, banking in the US is more modular than in Europe and Asia. Property & Casualty insurance has become more modular than Life insurance. Now, the modular industry structure will go deeper and spread to new markets,” commented Oliver Wyman Partner and co-author, Matt Austen. “Since the crisis, most firms have focussed on optimising their existing, integrated business model. Now, the industry is going to move towards a new, modular structure.”
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