Insurers need to take a long hard look at every facet of their business. The Internet of Things (IoT) is not only going to disrupt the whole of the insurance industry. It’s going to force participants in the industry to reassess every aspect of their organization. There isn’t a system or a process that isn’t going to be affected. The IoT is redefining how the insurance industry works and who will be its market leaders. Those that succeed, the new Insurers of Things, will have business models very different from the insurers of the past.
In my previous blogs, I stressed that insurers need to identify what roles they want to play in the emerging digital economy – service provider or value aggregator – and align their products, technology and ecosystem services to these roles. I want to highlight some more factors crucial to the success of insurance companies in future.
First up is the need to re-evaluate the whole value chain of the business. The IoT is going to impact every aspect of the value chain. Intelligent devices will permeate almost all components of the business and interlink companies with an increasing range of suppliers, partners and customers. When reviewing your value chain there are three important actions to consider:
- Extend – New services spawned by the IoT, and the additional technology needed to drive them, will force companies to extend their value chain. It’s important to leverage the resources of key partners and where possible integrate common processes. Look to outsource non-core activities.
- Automate – Insurers can substantially improve their efficiency and effectiveness by automating labor-intensive processes such as underwriting and claims and fraud management. The rise of the IoT, with extensive machine-to-machine (M2M) communications networks, and the increased availability of sophisticated data analytics and robotic process automation, enable companies to dramatically cut costs and raise efficiency.
- Adapt – In the new digital economy change is constant and relationships are paramount. Insurance companies will need to build new relationships with their partners and customers. Constant availability and attention are vital. Insurers must tailor highly personalized solutions that can be easily adapted as customer needs change. Partner relationships need to be flexible and dynamic to accommodate changing market demands.
Greater collaboration and co-operation are going to be vital. Successful insurance companies, the new Insurers of Things, will forge strong partnerships with a variety of allies. They will integrate the services of these partners within their own digital ecosystems. These close relationships will require insurers to share not only information but also customers.
This is going to be tough for many insurers. Ownership of the customer has long been at the core of the insurance business. In future, however, insurers will need to lessen their grip on their customers. They will have to allow their partners to supply their customers with complementary products and services. If they don’t, they won’t be able to build the business partnerships crucial for success in the inter-connected digital economy.
The need to share information and customers across digital ecosystems will place big demands on insurers’ IT resources. In my next blog I’ll discuss how insurance companies should re-engineer their IT architectures to ensure they capitalize on the opportunities created by the IoT.