Other parts of this series:
Many insurers have invested heavily in digital technology but failed to sufficiently restructure their organizations.
Insurance providers have a brief opportunity to get their businesses ready for the powerful disruption that’s about to shake-up their industry. To thrive in the highly-connected digital market, where most personal insurance products will be sold in future, carriers need to overhaul their traditional operations. They should become Everyday Insurers and emulate successful digital disruptors such as Amazon and Apple by offering customers connected services that are constantly accessible, personalized and pleasing.
Insurers that fail to adapt, as I mentioned in my previous blog post, could lose as much as 40 percent of their risk protection revenues within five years. While many insurers have invested heavily in digital technology they have often failed to sufficiently restructure their organizations. They can’t use their technology assets to attain the agility, scale and customer-reach enjoyed by powerful digital corporations. These large platform businesses, together with a swarm of innovative insurtech firms, are driving the disruption of the insurance industry. They’re setting the new standards for efficiency, customer service and innovation.
The disruption of the insurance sector will escalate as tech-savvy organizations increasingly roll out smart-automation and user-centric solutions. Advances in robotic process automation, distributed autonomous objects and artificial intelligence will improve substantially the efficiency of insurance operations and claims processes. Extended digital platforms and ecosystems, delivering “immersive experiences” and “living services”, will greatly enhance the customer experience and offer consumers a host of additional offerings. Many of these new offerings will be bundled, or blended, with products and services from companies outside the insurance industry.
Our research shows that insurers are likely to feel the impact of disruption across all the major components of their businesses – distribution, operations, risk assessment and claims. We’ve identified three serious flaws in traditional insurance business models.
- Late positioning in the consumer’s decision-making process.
- Low frequency of interaction with customers.
- Lackluster customer experiences.
As illustrated below, existing risk pools and insurers’ claims activities are likely to be most affected by digital disruption, followed by distribution and operations. The advent of semi-autonomous and hopefully safer cars, as well as less appetite among consumers for owning assets, will be among the most powerful disruptive forces affecting insurers.
To overcome these threats, and fix the weaknesses in their traditional business models, insurance providers need to move quickly. They should restructure their businesses to become the Everyday Insurers I mentioned earlier. This will allow them to use digital technologies, such as the Internet of Things, mobile apps and artificial intelligence, to weave their insurance offerings into their customers’ day-to-day lives. By continuously gathering data from a host of digital touchpoints they can constantly update and improve the personalized services they provide their customers.
In my next blog post, I’ll examine three new business models that could help carriers become successful Everyday Insurers. In the meantime, have a look at this link. I’m sure you’ll find it worthwhile.