Changing business dynamics drive insurers to a marketplace model

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Changing business dynamics necessitates insurers to rethink their demand-generation methods to remain competitive.

Across industries, technology has become a catalyst for business process transformation as it alters consumer lifestyles, behaviors, and preferences. What’s more, emerging technologies are lowering the barriers for startups seeking to work with big businesses. These days, agile newcomers are leveraging their technology expertise to collaborate with big companies – and capture market share.

Within the insurance industry, technology advancements are altering both supply- and demand-side equations (see Figure 1). From a demand perspective, customers now expect more personalization and comprehensive coverage. Increasingly, traditional insurance offerings cannot meet the needs of policyholders engaged with companies that feature new business and operating models. For instance, typical auto insurance policies do not provide comprehensive coverage for ride-hailing services.

Figure 1: Changing business dynamics necessitates new demand generation strategies

Changing business dynamics necessitates new demand generation strategies

Source: Capgemini Financial Services Analysis, 2019.

From the supply side, non-traditional players are entering the insurance space. Tech firms that have accumulated vast data around customer needs and preferences want to leverage that information to venture into insurance distribution. Other firms wish to bundle insurance offerings with their existing products, while others (such as Tesla) seek to insure their products.[1]

Tech advancements have enabled newcomers and established insurers to innovate offerings based on new business models. For example, usage-based insurance (UBI) is a growing trend thanks to rapidly evolving telematics technology and advanced data processing techniques that are spurring pay-as-you-drive (PAYD) and pay-how-you-drive (PHYD) insurance models.

As supply and demand change, so too do the ways customers want to access insurance. With information as close as their smartphones, today’s consumers want to explore and compare products before making a purchase decision – and they want to interact conveniently with firms via a variety of channels.

Within such a dynamic landscape, insurers must rethink demand-generation methods to remain competitive.

Historically, policies have been sold by agents who helped policyholders navigate through complex terms and conditions. However, today’s digital customers often bypass agents and become stymied by complex policy terms, which can be a sales deterrent.

Regulatory requirements across geographies are also driving insurance demand. However, the regulation of new business model insurance may not be evolving as rapidly as new models come into play.

Success within this emergent business scene will require insurers to simplify policies and establish new demand-generation methods. It’s no surprise that more and more firms are adopting easy-to-understand policies (with straightforward wording), automated processing, and interactive gamification tools to educate customers. Additionally, for demand generation, insurers should focus on bundling insurance offerings with other products to promote point-of-sale interest such as bundling mobile insurance with the sale of mobile phones.

Insurers have only begun to extend their products and services into external ecosystems.  Collaboration with multiple players across industries to bundle insurance offerings can generate an integrated array of offerings to create a digital, convenient, and personalized marketplace in which customers pick and choose relevant products to meet their personal and financial needs at the same time.

Interested in learning more about what’s driving the insurance marketplace of the future? Be sure to download a copy of the World InsurTech Report 2019, beginning Monday, October 7, for a variety of transformational success strategies.

[1] Los Angeles Times, “Tesla just started selling auto insurance,” August 29, 2019, https://www.latimes.com/business/story/2019-08-28/tesla-is-selling-car-insurance-to-owners-of-its-vehicles-in-california.

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