The traditional business model for insurance, though still a solid source of revenue, is becoming less sustainable in the long term due largely to the Internet of Things driving rapid innovation throughout the economy. Yet, insurers willing to reshape their business models, combining insurance with technology, ecosystem services and partners, can take advantage of the opportunities emerging from this disruption—to become “Insurers of Things.”
Three dimensions of the insurance industry will be most affected: consumers, offerings and risks, and competition. To keep up with their competitors, insurers will need to:
- Meet consumer expectations for not just a product but a unique “always-on” service-oriented experience.
- Move from products to services, while paying attention to new risk pools.
- Find the right partners to drive innovation, and compete with players from a variety of industries and new contestable markets.
In addition, I believe insurers can take rapid and informed action by adopting five keys to success:
1. Choose the role you intend to play
Insurers will need to operate in extended ecosystems, so setting the rules to collaborate with partners is essential. Companies can adopt different roles for each of their markets, businesses or regions, depending on their ability to provide a truly differentiated and extended offering that reaches beyond insurance. Two roles in particular will be important: service provider and value aggregator.
2. Build and work on three combined layers: product, technology and service
Insurers will need to define a connected offering model across three integrated layers: insurance product, technology and ecosystem services. They will need to choose the right core insurance coverage to be integrated in the ecosystem offering, leverage the right technology to complement the offering, and define and select ecosystem services that maximise value.
3. Extend, automate and adapt the insurance value chain
Because the Internet of Things will affect every phase and process of the insurance business, insurers need to take a broad set of actions across the value chain. They will need to leverage partners and third-party services, automate labour-intensive processes and make core insurance processes adaptive and iterative.
4. Share and collaborate through an open architecture
Insurers will need to open up to the outside world of ecosystem partners—sharing not only customer data, but customers themselves. IT architectures will need to evolve, ensuring flexibility and interoperability with external partners and providers.
5. Foster a culture of innovation
The Internet of Things strongly affects how people work and what is demanded of them. A new culture of innovation will need to be infused across the whole organisation, from idea generation to workforce training and onboarding.
The disruptive technologies of the Internet of Things are an opportunity for insurers who act quickly. In this environment, it is critical to be an innovator across the entire insurance value chain, while operating in a broader partner ecosystem. Effective leadership will be essential in creating a vision for becoming an Insurer of Things and then putting in place the operating models to make that vision a reality. Considerable risks are involved in this transformation, but the risk of doing nothing is far greater.
To learn more, read: Are you ready to be an Insurer of Things?