In my previous posts in this series, I briefly set the scene for Accenture Technology Vision 2014 for Insurance and looked at a few of the technology trends shaping the insurance market. Now, I’ll conclude with a brief look at where the industry is vulnerable to disruption and why insurers need to start embracing digital transformation if they are to remain ahead of a changing market.
Insurers have been relatively insulated from the upheaval digital technologies have brought to other industries. Insurance doesn’t yet have a victim of digital technologies as dramatic as Kodak—put out of business by the rise of the digital camera—or any number of struggling high-street retailers around the world.
The traditional insurance business model has, on the whole, prevailed. High capital requirements and regulatory hurdles have kept would-be disrupters out, and the industry’s value chain has remained more-or-less intact. That is all about change, thanks to a range of disruptive technologies that will mature over the next five to 10 years.
They will create new business models that could (in the long term) make traditional insurance seem as quaint as vinyl records and Polaroid snapshots. Such technologies will subvert the traditional approaches to assessing risk, distributing insurance products, and settling claims.
And these technologies will be driven into the market by companies such as Amazon, Google and Facebook—organizations with powerful brands and exceptional customer data at their disposal. Leveraging technology, they could offer flexible pay-as-you-go offerings that turn insurance into a utility— buy coverage if and when you drive, rather than for the entire month or year.
Another prime example is the driverless car—which could one day completely eliminate the need for personal auto-insurance.
Though the threat of disruption is real, one of the key messages of Accenture’s Technology Vision for Insurers for 2014 is that large insurers are as capable of driving the disruption as any digital start-up or established tech giant. Large insurers have many assets to draw on as they seek to achieve digital transformation—among them, capital, scale, stockpiles of customer data, and process discipline.
Their challenge is to use those advantages to reposition themselves as connected, customer-centric organizations that play a positive daily role in the customer’s life. Rather than selling cover only, tomorrow’s connected insurer will seek to be at the heart of an ecosystem of value that draws together sticky, everyday services from a range of companies and sources.
This might mean insurers will need to find their way around issues such as cultural inertia, regulatory barriers, and a lack of in-house technology skills. Here are a few ideas for incubating new digital business models and nursing them to maturity:
- Launch new teams with a culture of innovation.
- Make a core competency of rapid prototyping of new apps, and services that can be quickly connected to legacy systems.
- Establish intrapreneurial groups or innovation labs within the business to incubate breakthrough innovations.
- Use the balance sheet to provide venture capital to the startups that are nurturing the technologies of the future that will need to be insured, like driverless cars or drone cargo ships.
An insurer that gets it right can turn itself into a risk manager, advisor and value aggregator at the center of a digital ecosystem that delivers high-value services to customers every day. Rather than being disrupted, it can take the lead in disrupting its industry.