Insurance companies must radically rethink how they run their businesses if they are to succeed in the new digital economy. The Internet of Things (IoT), the vast array of intelligent devices, systems and processes that spans industries throughout the world, is breaking down the barriers of the past and creating a host of new opportunities and threats. Businesses that embrace these changes, quickly and effectively, are likely to thrive. They will become the new Insurers of Things. Those that stall may soon become relics of a bygone era.
One of the biggest casualties of the rise of the IoT will be the traditional insurance market. Many consumers already want to change their relationships with insurers. They are looking for more personalized and flexible services as well as tailored on-demand products that meet their changing needs. Old school insurance products just don’t make the grade.
Around 80 percent of consumers surveyed by Accenture say they would switch to insurers that gave them more personalized and integrated services. And 67 percent insist they want to buy what they want when they want it. These figures can’t be ignored.
The IoT is creating a digital ecosystem that will enable consumers to source quickly and easily the products and services they want and adapt them to suit their lifestyles. The insurance industry is not going to escape this trend. Already a crowd of digital heavyweights, such as Amazon, Google, Facebook, Apple and Samsung, is muscling into the insurance business. These companies are using their extensive digital platforms to deliver insurance products alongside other consumer services. They are not just targeting established insurance markets. They are also creating new opportunities to sell insurance to their customers. The boundaries that used to define service industries are fast disappearing. How should companies in the insurance industry respond?
The first step is to define where you want to operate. What role do you want to perform? Two key roles are likely to emerge:
- Service provider – delivering innovative technology-based insurance products through third-party ecosystems; and
- Value aggregator – providing a broad range of lifestyle services, beyond traditional insurance, some of which are developed in-house and others which are drawn from third-parties.
It’s not an all-or-nothing choice. Large organizations may opt to run several of their business units as service providers and others as value aggregators. Some companies may concentrate on one role. What matters is finding the best way to differentiate your business and its products and then selecting the most effective vehicles to reach new markets. Such focus is essential if insurers are to successfully embrace the IoT and emerge as one of the new Insurers of Things.
In my next blog I’ll examine how insurers need to align their businesses to achieve these objectives.