Other parts of this series:
- Insurers are grasping the need for ecosystem partners in the new sharing economy
- Insurers must re-examine all their business operations to capitalize on the power of digital ecosystems
- Insurers must move now to secure a presence in digital ecosystems and be ready to seize new opportunities
- Insurers must balance the needs of their traditional businesses with the demands of new digital ecosystems
- Insurers can learn a lot from how Google is balancing the demands of its traditional and emerging businesses
- Insurers need to be alert to the role of the Internet of Things in the rise of digital ecosystems
- Insurers must be ready to compete in markets that will be increasingly disrupted by digital technology
- Insurers must change from being providers of products to digital ecosystem orchestrators
The rise of digital technology is radically reshaping the insurance industry throughout the world. The increasing influence of digital ecosystems, in particular, is forcing insurers to compete in markets that are vastly different from their traditional environments.
Carriers quick to capitalize on this transformation will secure new markets, customers and revenue streams. They’ll be well positioned to take advantage of further changes in the insurance industry. But insurance providers that are slow to respond will soon find themselves overtaken by their competitors. Eventually they’ll struggle to compete in the digitally transformed insurance industry.
This digital transformation is already causing major structural shifts within the industry.
Changing risks and risk pools – Digital ecosystems, coupled with a variety of connected technologies, are shifting the focus of insurance liability from people to devices. Furthermore, enhanced data gathering and analytics systems have improved insurers’ understanding of risk and enabled them to develop new underwriting models. The fast growth of mobile and social media services has also accelerated changes to risk management.
New entrants and partnerships – A host of newcomers have moved into the insurance industry. And more will follow. Some, such as Bullfrog, Bolt, Bizinsure, AssureStart and Hiscoxusa, are new niche specialists targeting specific parts of the value chain. Others, Facebook for example, and big players elsewhere, are expanding into insurance. In addition, an increasing number of digital aggregators are hosting solutions from a variety of insurance providers. Many of these new arrivals have a specific advantage over traditional insurers. Some boast strong customer engagement, while others own innovative technology or large volumes of valuable consumer data. Carriers need to devise a comprehensive ecosystem strategy and then find partners that will provide the additional resources they require. Such resources could include key skills, prominent brands, advanced technology, new markets or a strong presence in specific ecosystems.
Changing economics – The rapid spread of digital technology is overturning the insurance industry’s traditional economic models. Smart insurance solutions, that incorporate mobile and connected devices, are driving down premiums while new risk protection and mitigation services are creating new sources of revenue. Insurers will need to make substantial investments to develop and deliver these new products and services.
In my next post I’ll discuss how digital transformation of the insurance industry will change carriers from being providers of insurance products to ecosystem orchestrators that access multiple revenue streams from a variety of networked digital services. Until then, follow this link. I think you’ll find it helpful.