The rise of the Internet of Things (IoT), and the rapid growth of the interconnected digital economy, is forcing insurers to redefine how they conduct their business.
It’s not enough for insurance companies to simply refocus their sales activities. Successful insurers, the new Insurers of Things, will have to realign other critical aspects of their business. In my previous blog, I identified two key roles that are likely to emerge in the insurance industry:
- Service provider – delivering innovative technology-based insurance products through third-party ecosystems; and
- Value aggregator – providing a broad range of lifestyle services, beyond traditional insurance, some of which are developed in-house and others are drawn from third parties.
Some organizations may mix these roles by running a few of their business units as service providers and others as value aggregators. Others may just concentrate on a single role.
Whichever approach is chosen, it’s essential to align the business to support these roles. Three important layers need to be in place.
- Products – Insurance products must match each customer’s personal needs and choices. The traditional one-size-fits-all approach has to give way to highly focused and personalized offerings. Insurers will need to apply extensive data analytics to deliver customer-specific solutions. They also must design modular and flexible insurance offerings that incorporate dynamic pricing structures.
- Technology – Digital technology allows insurance companies to establish and cultivate long-term personal relationships with their customers. The extensive information shared by customers enables insurers to improve service, increase product offerings and develop new markets. Rapid changes in technology can quickly obsolete investments in proprietary systems and services. Insurance companies should protect themselves by remaining technology agnostic and selecting the solution that best meets their business needs.
- Ecosystem services – The range of services that can be delivered across digital ecosystems is almost limitless. Insurers need to identify an ecosystem that can deliver value their customers will appreciate. They must be able to monetize the services delivered across the ecosystem, either by generating additional revenue or by gathering valuable customer information. The ecosystem should also be able to support and promote the insurer’s business partners.
Prominent insurers such as Allianz, Allstate, Discovery, Generali, John Hancock and State Farm have begun to embrace the IoT. They are leveraging digital ecosystems and technologies to deliver innovative products and services in the car, home and health insurance markets. Few companies, however, have defined a complete and extensive strategy to meet the challenges and opportunities triggered by the IoT. The true Insurer of Things is yet to emerge.
In my next blog I’ll examine some more factors vital for success in a fast-changing insurance market.