In my last post, I examined the value at stake for insurers as their traditional business models are disrupted. That disruption does more than threaten traditional revenue streams; it presents insurers the opportunity to develop new revenue pools and improve their cost structure. But as Accenture Strategy points out in its recent report, Stand on the Sidelines, or Boost Competitiveness? value capture in the future requires much more than “just” developing new cutting edge capabilities. More specifically, it will require expanding beyond just insurance to deliver broad and more holistic protection solutions that meet a broader spectrum of customer needs.
With increasing mainstream adoption of the Internet of Things (IoT), the resulting constant data flows will enable a broader set of protection solutions that we are now just beginning to see enter the market. This will range from simple usage-based insurance (UBI) products to embedded, on-demand protection to end state offerings–if there is such a thing in a digitally connected future–where connected insurance products are integrated with risk mitigation services to deliver holistic protection solutions that are continuously optimized based on constant flow of IoT data.
To frame how insurers can think about expanding the solutions they offer their customers, we developed what we call the protection game board. In the graphic below, the vertical axis represents the expansion of protection solutions. The horizontal axis represents the level of digitalization and connectedness the company operates with. The broadest customer outcomes are when services that are connected to the Internet are integrated to form broader protection solutions.
Every company has an implicit game board in place, but the question is where an insurer should place its bets in a digital future to grow revenues and rein in costs. Before looking at a few examples of carriers that are aggressively placing bets on the game board, here are a couple of pointers on how carriers can operate it:
- Carriers can leverage partners and emerging platforms to expand services.
- Partnerships and new innovative technology solutions set the stage for leapfrogging and moving quickly—NOT incrementally—on the game board.
- A digitally connected business model is a no-regret move regardless of positioning.
- Insurers can stay in their traditional model and still make money, but they will be a utility and must be hyper efficient to maintain economic, value-generating margins.
Here are a couple of innovative approaches to delivering expanded value-added solutions through a digital model:
- Tokio Marine partners with Japanese mobile phone operator NTT DOCOMO to offer an expanded set of protection solutions, including on-demand insurance for specific needs. Through its USAA Auto Circle service, USAA provides customers additional value-adding services—such as loan and car-buying/selling services—to complement its core auto insurance product.
- Discovery Vitality. Discovery is becoming an everyday insurer by combining innovative new capabilities of the Vitality Platform and partnerships to meet broader customer needs.
Similarly, we are beginning to see an explosion of examples of insurers expanding their core offerings through connected solutions and partnerships.
- Through its Drivewise telematics program, Allstate collects data on driving habits, provides feedback to customers and enables safe drivers to earn lower rates.
- Allianz is teaming up with multiple partners to deliver innovative, connected protection solutions for its customers. For example, the insurer has teamed with BMW to provide the Fleximile UBI program and with Deutsche Telekom to provide connected-home solutions.
- Multiple U.S. and European insurers are forming partnerships with home automation providers to deliver a connected-home protection value proposition. Stateside, there are the Liberty Mutual/Vivint, USAA/ADT and State Farm/ADT partnerships, for example. Expanding partnerships in this space in Europe include Intesa SanPaolo and H@bitat BNP Paribas Cardif.
New revenue-stream and cost-restructuring opportunities await insurers that adapt quickly to disruption. Companies that do not welcome the digital future will be left behind.
For more information download the report: Stand on the Sidelines, or Boost Competitiveness? How to Make Bold Moves on the New Insurance Playing Field