Other parts of this series:
Insurers that become living businesses will be in the best position to tap into an estimated $111 billion in potential revenue from insuring new emerging risks.
In my previous post, I talked about how becoming a living business can help insurers increase market penetration and grab a piece of the explosive revenue growth we’re expecting to see over the next five years. Today, we’ll explore a second revenue stream—new emerging risks—which has an estimated value of $111 billion.
New emerging risks include:
- Cyber insurance
- Increased longevity risk
- New commercial exposures in motor insurance
- Insuring digital / virtual assets
- The sharing economy
- The freelance / gig economy
Most folks understand the nature of risk arriving with autonomous and more instrumented vehicles, and much has been written about coverage moving from personal lines auto to general liability for vehicle manufacturers and software providers. But I’d like to explore a different angle. As I mentioned previously, I think the three levers of design thinking, building/iterating and connecting will give insurers an edge in the market.
Let’s assume a carrier wants to introduce a new product to cover general liability of an asset manufacturer for its analytics-enabled Internet of Things (IoT) device. Applying the concept of design thinking to this business-to-business relationship, the carrier will ask itself how it can expose risk data, prior loss data, safety data and risk engineering data for underwriting and pricing when it quotes on that policy.
Through relationships and integrations with OEMs, it will have a material opportunity to gain a better understanding of the space and how to price risks. Imagine the competitive advantage for a carrier that can stream data on historical performance of insured assets directly from manufacturers. Or the carrier’s ease of doing business with the brokerage community, or the effectiveness and efficiency of a more data-enabled underwriting workforce.
Similarly, the concept of building/iterating applies. The maturity of big data platforms and associated data lakes will make integration much easier. And as risks continue to evolve as fast as manufacturers can continuously improve assets, the ability to quickly consume new risk data and drive that into underwriting and pricing processes will further cement competitive advantage. This advantage must be fueled by an agile business and technology organization that has the tools to test, fail and succeed quickly.
Finally, connecting to an ecosystem outside of a carrier’s four walls is fundamental to understanding emerging risks, developing products that are relevant, and underwriting and pricing them in an effective and profitable manner. In the near term, carriers might be hesitant to invest here, citing things like the lack of standards across manufacturers or the lack of scale in the market. I would counter that now is exactly the right time to invest in these capabilities and to develop the living business muscles that will be required to compete in five years. Carriers willing to start building these skills now will have time on their side. Their risk is low because they will have time for testing and failing before these new capabilities need to be scaled up.
In my next post, I’ll look at how building relationships with non-traditional partners can help insurers grow their revenue.
In the meantime, if you’d like to learn more about our research, register to read the report: Insurance as a Living Business: Explosive Growth.
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