Now, more than ever, the cumulative force of change is making itself felt on established carriers. In the past, insurers have responded adeptly to new technology or changes in customer behavior. But the rapid advancement of technology such as Artificial Intelligence and Machine Learning, and the possibilities offered through 5G and blockchain, are unlike anything seen before.
These technologies not only enable more efficient processes within the insurers themselves, but also create demand for new products and services to cover new and emerging risk profiles – how do you insure a driverless car, for example?
In addition, insurers are still trying to figure out how to best serve Millennials and GenZ customers. This is a new client segment that is very reluctant to buy insurance products in general, as well as life insurance, disability and other types of wealth management products. The same is true for the gig economy and its new ways of doing business and creating new forms of employment. What needs to be insured and how?
New risks, new entrants and the need for collaboration
One of the new, and largely unknown, risks is rising cybercrime, which few insurance products currently address. The same is true for a world dominated by climate change and the threat it poses to people’s assets. Insurers need to catch up fast or see their very survival being threatened.
Established insurers are also seeking ways to deal with new entrants eating into their market share. As Capgemini’s WorldInsurTech Report 2019 points out, collaboration between insurers and InsurTechs will be key going forward. Incumbent insurers will not be able to ignore the InsurTechs, nor can they continue to build all their new capabilities in isolation.
It’s not yet clear whether the best path is for established insurers to invest in these InsurTechs or to partner with them. Time will tell, but collaboration is certainly on the cards with 90 per cent of InsurTechs and 70 per cent of incumbents saying they want to collaborate with each other. Thus, incumbents must start to plan for cooperation, rather than continuing to work alone.
Rapidly inventing the innovative products and services customers demand
Coupled with the speed of change, the above trends are putting an unprecedented pressure on insurers. And the time to act is now. Almost 60 per cent of all policy holders have expressed interest in new insurance models, but only about a quarter of all insurers have begun to adapt their business model. It seems that insurers have been failing to meet their customers’ demands for more innovative products, more dynamic coverage, and more personalization.
The good news is that incumbents and InsurTechs alike are beginning to change. To become more inventive. In the past couple of years, we have seen evidence of this in four key capability dimensions:
- Customer centricity: Increased customer-centricity enables insurers to better fulfill service and customer experience expectations
- Product agility: Agile innovation on products and services enables insurers to adapt to ever-changing market demands faster
- Intelligent processes: Development of an “Automation First” mindset drives intelligent processes, not only in the back-office but through the whole product value stream
- Open ecosystem: Greater willingness to (learn how to) build an open ecosystem of partnerships with 3rd party vendors and other insurers is driving better and more collaborative ways of working.
The bad news is that without better coordination and alignment across all four of the above areas, these efforts will not deliver the anticipated returns. In the past, insurers tended to kick off initiatives independently in areas such as CX, RPA, and AI, beginning with a lot of motivation, resources and budget. Then too many of them ran out of steam, or the company turned to other initiatives, or they were suspended altogether when they failed to deliver on their promise.
Identifying why initiatives fail
Incumbents and InsurTechs alike recognize the need for proactive reinvention in today’s insurance industry. So, what’s causing initiatives to fail? Our work with global insurers – and other organizations facing disruptive change – suggests two key reasons:
- An inability to tie together all the pieces of the transformation puzzle in a consistent way:
Without the complete picture, it becomes difficult (if not impossible) to make educated choices on where to put resources and what improvement efforts to emphasize in order to maximize the return on investment being sought.
- A failure to put in place the right data management to support these initiatives:
This can span from lack of customer insights and a poor understanding of the data points that really matter for a successful and delightful customer journey, to shortage of data that drives innovation. Ineffective data management also leads to a failure to support intelligent automation when data is digitized without being machine-ready. An inability to exchange (meaningful) data with partners in a standardized and relevant way is another data issue.
Becoming an Inventive Insurer
What’s the answer? How do incumbents and InsurTechs provide the trusted and innovative insurance products their customers want? How do they map their way to becoming an Inventive Insurer? One that’s able to master the four capability dimensions of customer centricity, product agility, intelligent processes and open ecosystems, as well as an enterprise-wide approach to data management? How do they start to design a data strategy tying everything together so that the business survives in the competitive and rapidly changing world of insurance today and tomorrow? In essence, how do they reinvent themselves?
Our Inventive Insurer concept offers a solution for staying ahead of the competition with the four capability dimensions. It can be used in multiple ways, depending on what stage your company has currently reached:
- Set strategic priorities
Identify what your customers are demanding and what your competitors are doing across the four dimensions and find areas to focus on that give you a unique value proposition/operating model
- Review existing investments
Prioritize existing projects by categorizing them into the capability dimensions and evaluating their alignment with your strategic goals
- Identify/evaluate new investment opportunities
Find the gaps in your project portfolio that are preventing the realization of a capability or strategic goals and identify/evaluate new projects that can fill those gaps
- Align and communicate your strategy
Align key stakeholders with the company mission and strategy in an intuitive way and communicate that mission and strategy to the broader organization
- Identify/evaluate partnerships
Explore the range of partners in each capability dimension and evaluate their ability to deliver your ambitions and align with your strategic goals – rethink partnerships that don’t add value and bring on board new partners that enable new products, capabilities or services
- Analyze the competition
Understand what type of investments your competitors are making in each dimension and identify where you can be different
- Evaluate expansion opportunities
Perform a customer and competitor analysis for a new market or product utilizing the capability dimensions to determine the entry strategy
Dare to reinvent your business
You’ve ticked all the above. Now you’re on your way to being an Inventive Insurer. What results will this transformation yield? The benefits of become an Inventive Insurer are clear: we expect to see high percentage gains across the capability dimensions, such as 60% increased customer satisfaction, 50% savings on operational costs for insurers and up to 6% increased revenue.
So, dare to rethink your business. Do not just follow the pack – lead it. Reimagine. Reinvent. Dare to become an Inventive Insurer.
Our next blog post will discuss how to begin your journey (if you are still in your starting blocks) and how to tie all your ongoing initiatives together in a way that helps you transform your business into an Inventive Insurer.
Get in touch if you’d like to find out more about becoming an Inventive Insurer with support from Capgemini Invent.