In today’s market, customer-centricity is critical. Accenture estimates that traditional multi-line and multi-channel insurers that do not respond to evolving customer needs may lose approximately 35 percent of their economic profit in the next five years. We’re focusing principally on individual and small commercial insurers, and of course the profit at stake varies from one insurer to another and depends on a variety of factors. But few carriers could endure a profitability reversal of this magnitude.
Specifically, Accenture sees three main threats to insurers’ profitability:
- Distribution threats. Insurers face increasing competition from both within and outside the industry. Banks, for example, see insurance as a natural extension of their core financial product range. Telcos and large retailers are exploring ways to leverage their market position and customer base to develop insurance offerings. And Internet giants such as Google, Amazon and others are looming as competitors that could reinvent the industry.
- Production threats. Insurers should be paying attention to developments in small-ticket, temporal and microinsurance. Similarly, connected devices and telematics begin to blur the lines between insurance provider and data provider, and raise questions about who will own the relationship between that information and the customer it belongs to.
- Regulatory threats. Finally, insurers must be aware of changes in the regulatory landscape, and the effect that they may have on short- and long-term profitability.
These threats highlight the limitations of having a product-centric focus. Instead, a customer-centric focus enables insurers to have the flexibility, agility and adaptability to adjust to challenges as they appear.
Many insurers are waiting to see how the landscape shifts, and then react to it. They do so at their own peril—“wait and see” is not a clear pathway to success in this highly competitive market.
- Read our latest thinking on Costumer Centricity
- Read Customer-centricity in the digital era, part 1: Introduction.
- Read Customer-centricity in the digital era, part 2: Five pillars of customer-centricity.