Business disruption in insurance has become a hot topic, but it’s not a passing trend. It’s the new normal. The major cause of disruption is the rapid advancement of technology, which allows new business models to be introduced at an ever-increasing rate with rapidly declining costs. The stakes are high with expectations from customers growing and time is running away.
The truth is, at this very moment, your company is most likely either disrupting other companies or being disrupted by other companies. The only sustainable advantage you can have over others is agility, that’s it!
Disruption and technology, together with incumbent pressures, have given the industry food for thought. This article is not about technology, but rather about how insurers monetize technology and seize opportunities, given that traditional insurers are struggling to realize competitive advantage from technology investments as InsureTechs chip away at market share.
Insurers need to become experience-driven by future-proofing their strategy.
Business models benefit hugely from technological advancements. Applying the context explained below helps future-proofing.
Insurers are moving from product silos to customer centricity. Insurers monetize this change across the value chain applying technology innovation in the following areas:
Additional white spaces give significant potential to grow the business and penetrate emerging business segments. The opportunities include:
Let’s review some of the factors the insurance industry is grappling with, as reasons for driving change.
To prioritize, let’s review the top three choices insurers face in their transformation efforts and how we address this opportunity:
These days, customers buy experiences, rather than product features. They base their expectation on what other industries can offer eg. Amazon, Facebook increasingly leverage digital channels. Being relevant, proactive and timely is not just a customer expectation, but an opportunity to upsell, personalize, add new value-added-services and retention.
Data through IoT, smart home ecosystems, wearables, sensors, social media, telematics and the applications of these through big data, predictive and behavioral analytics has created this segment into a business opportunity. Many insurers expect their CDOs to be entrepreneurs, find ways to monetize business value and generally run the initiative as a business leader reporting to the CEO.
Insurers are changing their focus from relying on historical data to predictive and forward-looking models.
Some key data strategy benefits include:
Modeling emerging risk: Technological innovations and new business models spur new risks that must be predicted before underwriting a policy. As the technology landscape changes, insurers must develop capabilities to predict risks that an innovation or new technology might introduce so they can create new products and refine existing policies.
Customer lifetime value model: Through data and advanced analytics, insurers can build a robust customer lifetime value model that predicts the long-term value of a customer (future purchasing behavior and risk) while selling the policies to a customer in real time. This capability enables insurers to focus on profitable customer segments.
Behavioral analytics: Understanding customer behavior lets insurers offer personalized products and target their marketing efforts. With insights on customers, insurers can strategically predict an individual’s potential for risk and price premiums.
Insurers can achieve future-proofing through innovation/modernization labs, transformation office as an example. Many technologies and business teams are working hard to achieve initiatives such as cloud, enterprise microservices, agile and DevOps, omnichannel, RPA CoE etc.
These modernizing initiatives are making a transformative impact to the insurance industry, giving the ability to launch a new product and greenfield operations, automate underwriting, enable touchless claims, faster policy services, better customer engagement, predict risks, offer a better price etc.
Insurers can achieve growth through a combination of ventures, strategic partnerships and engaging growth strategy companies. These initiatives help to define a strategy for markets and products that meet the CEO’s vision.
The goal should not be to do it all, the goal is the ability to move from a silo shop to an eco-system that can sustain the future needs.
To summarize, every insurer can achieve a complete transformation by –
- Optimizing – drive lower cost, reduce insurance risk, increase speed & find money to fund change
- Modernizing – getting the best value of what you have (core), with targeted innovation and customer experience and creating digital agility
- Innovation – create new business models, identity, products, customers and future-proofing your eco-system
These teams cannot work in isolation and need a tightly integrated strategy to get the combined value as an outcome.
The common denominator is a clear path to digital agility.
As industry definitions across sectors are revised, the prognosis for survival within an impervious insurance silo is low. Now, more than ever, strategically leveraged channels and carefully chosen partnerships are critical to building an enduring value-creation model. Digital agility and an integrated ecosystem are the twin levers required to enhance customer experience, drive operational efficiencies, and foster long-term business viability.
Insurers must adopt holistic growth strategies―such as the digital framework outlined in this blog―that combines the mechanics and teams into a single integrated enterprise strategy with the framework being common underlying resource empowering all teams.
Digital agility and an integrated ecosystem can provide a significant boost to insurers’ customer engagement and revenue growth by providing better insight into customer needs and improving time to market for innovations. New technologies enable innovative value-added services and analytics allow greater scope for leveraging existing data to create new offerings or to target new customer groups. Because traditional revenue models and insurer strongholds may face redundancy, digital tools and technologies can be used to explore new revenue sources and plan future-ready portfolio expansion.
Tomorrow’s digitally-integrated multi-partner insurance ecosystem will support flexible operations and a seamless flow of information and services. For customers, this means a well-orchestrated, personalized and convenient insurance experience. And for insurers, this ecosystem allows utility models, new product launches, easy new operations and the easy setup of new business models and channels that cuts across an ecosystem of internal, external vendors, InsureTechs and TPA’s.
Digital agility drives business agility.
Those companies that use technology and digitization to provide insurance solutions and customer experience will be the ones to succeed.