Digital technologies and the resulting new business models—such as peer-to-peer insurance or personalized auto coverage enabled by in-vehicle telematics—pose major threats to insurers, agreed 76 percent of the respondents to the Accenture 2015 Global Risk Management Study, North American Insurance Report. The key threat is competition, notably disruptive new market entrants from the technology sector. These new competitors can leverage their extensive customer data and advanced digital capabilities to assume the intermediary role insurers traditionally have filled between customers and underwriters.
But digital business models and technologies also present lucrative opportunities to insurers—transforming how the industry creates value and interacts with customers. “As well as being a major growth opportunity, digital can be a powerful tool to reduce the cost to serve, because a transaction on a digital channel is significantly lower than it would be with an agent,” noted Richard Lumb, Group Chief Executive Officer for Financial Services at Accenture.
A quick response by insurers is critical. We believe insurers have a short window in which to invest in customer-facing digital technologies to head off the threat from new competitors.
Signs suggest, however, that insurers are reacting too slowly. Only 38 percent of the North American insurer respondents to the Accenture 2015 study have a greater risk appetite for major digital initiatives. At the same time, how insurers currently manage emerging digital risk greatly impedes the effectiveness of their risk functions, 32 percent of the study’s North American respondents reported.
To help senior management steer the right course, we believe CROs must assess both the opportunities and risks that digital initiatives present. Encouragingly, 86 percent of the North American respondents to the 2015 study believe that digital initiatives will create significant opportunity for the risk function to partner with their companies’ business side. And 50 percent feel strongly about it.
To that end, CROs will have to build on the risk function’s position as a strategic business partner at the board level. Currently, only 38 percent of CROs are key decision makers in their companies’ digital initiatives, according to the 2015 study.
Next time: By renewing the emphasis on operational risk management, the risk function can assist senior management as it redefines business models.
- Read Accenture 2015 Risk Management Study, North American Insurance Report, part 1: Repositioning the risk function
- Read about the Accenture 2015 Risk Management Study and use our risk benchmarking diagnostic
- Download the North American Insurance Report
- Download the Global Insurance Report