In my previous post, I sketched a picture of changing customer demands and a new competitive landscape for insurers. Now, I’ll delve into the ways that digital technologies are shaping the competitive landscape.
Our world has changed dramatically over the last decade. Just five years ago, smartphones and tablet computers, cloud computing and massive real-time data and analytics were not yet mainstream technologies.
And a decade ago, a high level of broadband penetration was not yet a reality in most countries. In the next wave of change, we’re seeing smart, Internet-connected devices and sensors proliferate at a rapid pace.
What this means is that the physical and digital worlds are no longer separate. In most situations, physical and digital components coexist and enrich each other. Mobility and machine-to-machine (M2M) connectivity are providing additional opportunities for real-time tailored services and access to ecosystems—and thus to the borders of new industries.
All of these emerging technology trends are enabling new patterns of behavior. As the diagram below shows, they are having a significant impact on the relationship between the insurer, its distribution channels and its customers.
Figure 1. New emerging technology trends are enabling new consumption models.
Customers are much more informed and demanding thanks to search engines, relevant content, comparison sites, social networks and more choice. Customers are also closer than ever before to a vast number of players from other industries, also thanks to digital technologies.
The result is that the race is on for digital transformation, since leading disrupters from other industries are already targeting financial services customers:
- Amazon in late 2012 announced the introduction of “Lending”, a service which provides loans to merchants which operate through the company’s platform.
- China’s Alibaba became the world’s fourth-largest money-market fund only nine months after it acquired an asset manager and launched the fund on its platform.
- Facebook has requested authorization by Ireland’s central bank to become an “e-money” institution.
- Google has held a banking license from the Netherlands since 2007.
But much more is going on with incredible speed, both by the known players and the unknown—or to be known in the future. What happens, for example, if Apple tries to leverage its 575 million registered iTunes users for a financial services play?
What if these giants were to direct their advantages in customer-centricity toward the life or P&C industries? The pace of change is accelerating rather than slowing down, to the extent that it is difficult to guess where the next threat may come from.
Brand new customer-centric value propositions can be launched on all digital channels, including mobile and social networks, in less than 12 to 18 months. This is an opportunity that is open to both insurers and to disrupters from other industries. But most insurers have yet to leave the starting blocks.
In the next post, I will take a closer look at the new insurance customer.
To learn more, download this report: The Customer-centric Insurer in the Digital Era