The insurance industry is balancing many internal and external pressures. New business models, new products and risk mitigation services, and evolving core capabilities combined with regulatory, environmental and social issues and changing expectations from customers.
The accumulation of data is exponentially growing and outpacing the ability to make use of it. Insurers are the originators of using data to help understand consumers and business. However, trust in the insurance industry is a concern. Only 30-40% of consumers have trust in their own insurance company or in the industry in general. To convince customers to share data, insurers need to consider three dimensions of sharing: trust (privacy, cybersecurity), benefits and cost. Achieving this trust creates mutual value for the insurer and the policyholder.
Understanding and using data is at the heart of new products, services and business models for many insurance technology (insurtech) start-ups. They are leading the industry in terms of using data in a way that enhances the relevance to their consumer group. Incumbent insurers are learning and working with these start-ups, in different levels of maturity. At the lowest level, insurers are partnering with insurtechs to evaluate innovative technology and processes. At a more advanced level, they are setting up corporate venture companies to make financial investments into insurtechs and leveraging the ecosystem to meet internal strategic objectives. Finally, the most mature and committed insurers are making acquisitions and using insurtechs as accelerators for their own business transformation journeys.
There are numerous emerging technologies and concepts that are enabling and driving change for the insurance industry, such as:
- Cognitive capabilities (Watson) – IBM’s Augmented Intelligence (rather than Artificial Intelligence/AI) – evolving to drive agility while focusing on amplifying human cognition.
- Cyber security – increased digitisation and movement to the cloud, plus well-publicised data breaches.
- Platform economies – shaping the future of innovation with ability to build own ecosystem of partners to share capabilities, data and learnings.
- Internet of Things (IoT) – using senor data for personal and commercial reasons, helping with life improvements and prevention. Aligns with mutual insurers to provide value-add services to their members.
A common trend among these new technologies is that they collect and use data on alarger scale, at a faster pace, and in a secure and meaningful manner. These are being explored and experimented with across the insurance ecosystem, with firms building minimum viable products (MVPs); proof of concepts (POCs); and rising implementation and integration into the insurer’s operating model.
Technology and evolving capabilities are driving transformation across the insurance value chain, not just in areas where data is traditionally utilised (underwriting, claims) but also in new functions such as marketing, distribution and HR. However, technology transformation is no different to any other transformation. It is supported by leadership, strategy and change management, which all need to be aligned across the business to drive an integrated approach.
