What is the Future of Insurance Industry?
New partnerships will make the customer journey frictionless. Major automakers, for example, are developing internal insurance offerings for consumers who purchase their vehicles. Allianz and Volvo are building a collaborative insurance ecosystem, tailoring their offerings to fit the vehicles they produce, while also adhering to the ethos of the larger company. These new capabilities are becoming fixtures of the insurance landscape. However, how do they change the way Insurers do business?
Insurers will compete with digital players
As the world continues to evolve at a rapid pace, the needs and expectations of customers are also changing at a faster pace. The insurance industry is no exception. Customers expect the best digital experience – and don’t care if they are in the insurance industry or not. Instead, they want an experience that satisfies their every need. Insurance companies are no longer competing with each other, but against a multitude of digital players.
While digital players are disrupting many industries, they aren’t replacing people. In fact, the leading insurance companies of the digital age will seamlessly weave technology, people, and processes to create an exceptional customer experience. While the ingredients for success may seem simple, only a handful of companies have yet to come up with the perfect recipe. These ingredients include digital innovation in insurance, analytics, artificial intelligence, and a deep understanding of customers. The insurance industry is embracing these ingredients in unprecedented ways, but few have yet perfected them.
As a result, insurance CEOs should take a fresh look at their business goals and imagine how they can use digital technology to achieve success. Developing a digital capability requires a thorough review of the industry’s technology stack. Fortunately, there are several new technologies available to help insurers make this transition. But before insurers can make any big investments, they need to reconsider their objectives and envision their future state.
The pace of change in the insurance industry will depend on a number of factors, including the adoption of new technology, the extent of regulatory changes, and the preferences of consumers. Digital innovations, such as artificial intelligence (AI), will allow insurers to look beyond just reimbursing damages, and may even incentivize risk-reducing behavior. This is likely to reduce costs and create value for all stakeholders.
Insurance companies must transform fast to remain competitive.
More consumers are turning to digital channels to buy their insurance products, and the pandemic has only increased this trend. Meanwhile, direct insurers have an advantage over traditional insurers, including the ability to scale quickly, launch new products quickly, and recruit top tech talent. A lack of digital experience has long plagued the insurance industry. The digital experience is key to maintaining a competitive edge.
Insurtechs will offer dynamic policies
As the availability of data grows, insurtechs can leverage it to better assess risks. For example, driving behaviors can be recorded with driving recorders or by installing location-based apps on customers’ smartphones. QuanTemplate, an insurance data integration platform, provides analytics to improve underwriting performance. The growing availability of data also makes managing external sources of data relevant. Insurtechs’ innovations can help insurers improve the customer experience.
The term insurtech is used to describe
the merger of technology and the insurance industry. It is an evolution of fintech and is largely driven by technological innovations. Insurtechs are primarily focused on disrupting the insurance industry, and some are already offering ultra-customized policies, social insurance, and access to data from Internet-enabled devices. Another way in which insurtechs can transform the insurance industry is by offering dynamic premium pricing based on observed behavior.
With the proliferation of smartphones,
InsurTechs have made it possible for customers to choose their policies for specific situations. Mobile convenience has become an absolute necessity for customers, and Insurtechs can provide it. Cuvva, for example, lets consumers buy car insurance by the hour. Other InsurTech innovations are focused on maximizing convenience and product simplicity. Smartphone insurance is also possible, and can be bought in minutes. Insurtechs differentiate themselves through highly customizable insurance products, and they specialize in niche insurance segments.
The insurtech movement has changed the insurance industry.
Insurtechs have redefined the way the industry operates and the way in which policyholders interact with insurers. They can help insurers pass risk through reinsurance and redefine the way they interact with customers. This, in turn, increases policyholder engagement. It is a win-win situation for both parties. Moreover, insurtechs can help insurers cut operational costs and boost customer satisfaction.
Insurers will build new business models
Insurers will build on the customer experience and develop a more end-to-end relationship with their customers. This may include linking their products to specific life events, such as getting married, having children, or owning a home. Insurtechs are already doing this, such as Lemonade, which started off with property insurance but has now expanded to auto, pet health, term life, and even pet insurance.
Despite the insurtech revolution shaking the insurance industry,
traditional insurers still face a number of challenges to keep up. Unlike insurtech companies, traditional insurers lack the experience and resources of decades of experience. Therefore, they must develop new ways of working while combining their decades of expertise. Many insurance executives are already embracing the new technologies, which create a competitive threat and partnership opportunities. Investing in new technologies, like cloud computing, is an essential part of the digital transformation of insurance.
Changing risk landscapes and changing customer
preferences are driving the evolution of insurance business models. New insurance hubs have emerged in Singapore, Hong Kong, and Shanghai. India is an exciting opportunity to grow the insurance market despite being small compared to China and the United States. In addition to these hubs, emerging markets such as Latin America and Southeast Asia also present considerable growth opportunities. Despite these challenges, however, the new hubs remain relatively small, and the size of these markets is limited by their relative size. For instance, India has the largest population after China, but the insurance market is only one-fifth of China’s. By 2030, India will contribute about 3% of GWP growth.
As traditional insurers continue to face increasing costs
and pressure from customers, they may need to become more flexible. These new insurers will seek to reduce their capital intensity and focus on niches. Some will develop in-house capabilities for self-insuring. Others may even choose to establish offshore subsidiaries or expand their collaboration with other companies to share risk in captive insurance arrangements. These forward-looking insurers will seek to leverage new technologies and innovative business models to build profitable businesses.
Insurers will access capabilities as a service
Insurers will increasingly use capabilities as a service to augment their existing operations. For example, Cyence’s cyber analytics platform allows Allianz to determine a corporate customer’s cyber risk profile and tailor coverage based on this assessment. While insurers will benefit from this technology, the challenges of scale remain. While Cyence’s capabilities are largely internal, they may be used by other companies in other sectors as well.
Insurers will need to build an ecosystem of partners to scale their business.
They can choose to participate in ecosystems orchestrated by other players, such as tech startups and other insurers. However, this option requires significant outlays of capital and may not be a strategic choice for all companies. Some insurers may decide to play both roles at the same time. For example, Allianz and AXA have created investment units to seek out entrepreneurial opportunities.
The benefits of insurance as a service are several.
First, it allows for faster and more flexible implementation. Then, the insurance company can focus on its core business. For example, Immoweb has launched a new product called Landlord’s Insurance in a matter of weeks, thanks to the open API Qover provides. Another example is Qover, which has a plug-and-play approach to a digital insurance solution, which enables the insurer to offer a one-stop-shop to clients and generate additional revenue. Furthermore, digital insurance provides opportunities for differentiation, which is a crucial aspect of success in the future of insurance.
The benefits of insurers leveraging these capabilities
include increased efficiency and customer satisfaction. By providing an enhanced experience to customers, insurers will gain trust and loyalty from policyholders. The insurance industry can move from a transactional relationship to a relationship in which they become trusted advisors. This is one of the best ways to increase customer loyalty and increase revenue. They will also be able to offer personalized insurance policies and experiences to their clients.