Other parts of this series:
Insurance has been shielded from much of the disruption that has upended other industries, but long-term growth requires them to become living businesses—or risk becoming irrelevant.
While other industries have had to grapple with disruption and changing customer expectations, insurers have mostly been shielded from the need to respond immediately. High barriers to entry and adequate profit margins have provided some protection for insurers, but are not a long-term strategy for survival or growth.
At many points in history, entire industries have been rendered obsolete by the inability of its players to see—and adapt to—changes in the market. Refrigerators replaced the ice delivery industry; the internal combustion engine replaced the horse-drawn carriage. It isn’t out of the question that new competitors could find innovative, novel ways to help customers manage their risk—and in the process, make incumbent insurers irrelevant.
If insurers want to be more than a quaint idea, they must fight to be relevant. At Accenture, we believe that meeting this challenge requires insurers to become living businesses: continuously adapting with speed and scale, to achieve customer relevance and sustained growth.
Finding new opportunities and new profit pools
The devil’s advocate would say the insurance industry’s aversion to risk has worked so far, so why not stick to traditional business and operating models? Well, insurance hasn’t changed much in 200 years, but everything around it has. If the threat of disruption from the GAFAs (Google, Apple, Facebook and Amazon, and the ever-expanding host of large platform businesses) isn’t enough, there’s the fact that that relying on the status quo is also detrimental to future growth.
Insurers would be short sighted to assume that existing profit pools will exist indefinitely and in their current form. For example, autonomous vehicles will undoubtedly affect car insurance premiums. But at the same time, new profit pools will emerge, and it’s up to insurers to develop new products to tap into them. As my colleague Erik Sandquist explained, Accenture estimates the growth potential over the next five years, for those insurers that are able to take advantage, to be as much as $375 billion.
Technology enables living businesses
It’s almost impossible to become a living business without a deliberate strategy to invest in digital. Digital drives nearly everything. It enables carriers to unlock new sources of revenue, target new customer segments, bring new products to market and offer value-added services that better engage customers.
And yet, most carriers still struggle with legacy systems. As long as they do, they will also struggle to make the most of new technologies. What’s more, legacy eats capital—capital that could be put toward core transformation or innovation. Legacy also inhibits flexibility, which prevents a carrier from capitalizing on emerging opportunities. But as I’ve written before, legacy doesn’t have to inhibit innovation.
In order to become a living business, insurers must simultaneously invest in core transformation and innovation. Things like insurtech, blockchain or the IoT can offer insurers a boost, but without modernizing the core, insurers will struggle to take advantage of the opportunities that new technologies create.
If digital is one key to becoming a living business, another is smart partnerships. Join me next week as I explore why—and share examples of organizations that have taken steps to become living businesses.
Learn more about insurance as a living business, including our infographic, full report and interactive calculator to see how much potential revenue your organization could capture as a living business.
To discuss how Accenture can help your organization begin the transformation to living business, please get in touch.