A stark choice confronts insurers: embrace and help define the new order, or eke out an existence while clinging to an increasingly underwhelming value proposition. You might think we are overstating the crisis, but several self-evident truths demonstrate that this really is the case:
- The concept of pooling and underwriting could be viewed as an obsolescing one.
- We have more and more evidence that core products are viewed as commodities by customers.
- There is a negative connotation to the word “insurance.”
To survive in this environment, insurers need to decide which business models to invest in. Those players that can see the big picture are repositioning themselves to move away from the passive role of insurer to that of a risk manager and advisor. This will allow them to become a hub, bringing together a series of offerings, and a trusted advisor who is a positive part of people’s daily lives.
However, one of the key things to understand is that most insurers cannot and should not attempt to go through a “beyond insurance” transformation within their four walls. A risk-adverse culture, large-scale governance and time-consuming processes will all negatively affect a firm’s ability to reinvent itself. Instead, firms need to have the courage to launch a “red team” or a separate entity whose role is to detect new needs and intentions, spin up new services and cannibalize the existing business. This requires a different type of thinking, different measurements, and a cross-industry, co-invention mindset.
At Accenture, we recommend insurers think of their business as an investment portfolio. Their main investment is their traditional business model. Beyond that they should add digital capabilities which improve the customer experience, lower loss ratios and deliver more straight-through processing—all things necessary to keep up with the Joneses.
All kinds of innovation are happening, and we believe these “beyond insurers” can be at the center of the new economy by proactively defining a role for themselves within this innovation. Their role is to monetize disruption, serve as a proxy for regulation, make new invention a safe reality and embed themselves in the upward march of humanity.