The insurance industry is at crossroads. On basis of the report Insurance at the Intersection, we’ve compiled eight strategic imperatives insurers need to consider in response to the challenging and rapidly changing business environment.
How can an insurance company, dermined to future-proof itself, handle the ever-changing digital transformation where startups are challenging all aspects of the traditional business model? These are our conclusions based on experience from working with insurance clients on a global basis (also check out our dedicated Future of Insurance site and our insurance offerings):
- Insurers must move from “doing” digital to “being” digital. Most insurers’ approaches to going digital have amounted to a digital veneer placed on top of legacy systems, processes and products. However, the growing impact of IoT, Big data insights, machine learning and automation, signals a step-change in how insurers must apply digital technology. And as digital promotes transformation of their customers’ business models, insurers must also evolve their products and risk management processes to meet new demands.
- Insurers face a battle to remain relevant.Insurers are struggling to keep pace as digital opens new ways for retail and commercial consumers to access services — and heightens their expectations. For personal lines, new entrants are focusing on new insurance models and targeting specific failings in the current insurance customer experience, while life insurers are struggling to attract new business. Commercial customers, meanwhile, are striving for deeper insights from Big data.
- Exciting opportunities are arising for insurers that can deliver new value beyond the preventative model. Big data advances can unlock new revenue streams for insurers. To capture opportunities, insurers must shift from the traditional reactive insurance model, to a new IoT-driven preventative model and ultimately develop new value propositions.
- Understanding human behavior will enable new service models to succeed. As growing volumes of real-time data become available, insurers can become more than indemnifiers of risk; by understanding how to drive positive behaviors, they can coach businesses and individuals to avoid risk by acting on insights from data. However, they will need deeper human behavioral expertise to embed new services and interactions with customers in a way that makes them take action.
- Insurers stand to make significant financial gains by moving to the new model. If insurers successfully shift their models from reactive to preventative, it will disrupt the economics of their businesses: customers will make fewer claims, and premiums will fall. Insurers will therefore need to convince customers to pay for the new types of value they can deliver. However, by going a step beyond the preventative model, to one that adds value beyond risk, insurers can generate new revenue streams which are much more capital efficient.
- New engagement capabilities will be key to succeeding with interactive business models. New models will require multiple client interactions and proactive engagement; a potential threat if not done well, but also a clear opportunity to increase interactions with customers. By automating processes and implementing intelligent digital technologies, insurers can become hyper-efficient in areas such as claims handling and underwriting, and devote greater resource to more meaningful, higher value interactions with customers.
- The right enterprise strategy is the key to growth. Insurers must assess their strengths and identify the model that they can compete with in future. That might be as a master of omnichannel delivery that owns the customer relationship, the orchestrator of an ecosystem of partners, or a super-efficient, data-savvy supplier that offers its services through third-party providers. The key is charting the right course, sharing a clear vision across the organization, and empowering the workforce to get behind and carry out that change.
- Insurers must now learn to run. While insurers’ existing business models hold significant value, there are many areas where insurers are not performing well, or that will not offer value in future. The next step forward is to assess where value can be generated a decade from now, and to embrace strategies that will accelerate the path to get there — whether it’s collaborating with industry disruptors or establishing new ventures.
If you'd like to learn more, we also recommend reading up on the Top 3 digital imperatives for insurers.