Insurers adopting this business model create an entirely new digital business, while leaving their existing one largely untouched.
In this final blog on the four digital business models or archetypes, I’ll look at the Hybrid model. Companies adopting this strategy neatly side-step some of the difficulties—and they are considerable—of making a transition from the traditional business model to a digital one. The scope for losing customers during such a transition is a real risk. Another consideration is that the existing business might be operating well and profitably, and the decision to adopt a new, digital model might be less a function of immediate need and more one of prudent preparation for the future.
The hybrid model, as the following diagram shows, occupies the top left-hand quadrant, indicating a desire for sales-led growth combined with a no-frills customer relationship that’s strong on efficiency.
Of course, Hybrid digital insurers will use technology to enable their existing channels (thus following the channel-enabler model) and to create new ones. This is an approach that would tend to maximize value, but risks a dilution of focus.
There are many advantages to this model, not the least of which is the fact that it reduces the risk of transitioning customers, as noted above, and also it allows the company to start off with a clean technology slate. As we all know, one of the biggest technological challenges is to integrate new technologies and business models with legacy ones—the classic “trying to build an airplane in mid-flight”.
Surprisingly, I see few genuine examples of this approach, which you might argue is in some ways close to the online approach. I do, however, increasingly see boardroom discussions starting to focus on this option. Boards are beginning to understand that the Hybrid model allows the company to sidestep legacy issues, and align the business and technology much more closely than they are currently. In some ways, the flourishing Digital Labs being set up by insurers is a way to explore this option, and begin to shape the business approaches and new customer interactions that should underpin this model.
Many of these discussions about setting up the Hybrid model come out of discussions about how to manage disruption; more specifically, how to avoid being disrupted by becoming a disruptor. Such a discussion often leads to the evaluation of new offerings and business models. For that reason, I propose to conclude this series on High-Performance Digital Insurer models by investigating some of the next-generation offerings we are already seeing in the marketplace.