The insurance industry is undergoing a seismic shift, moving from simply managing risk to actively predicting and preventing risk.
Disruptions from new insurance and insurtech players are shaking up this formerly monolithic industry – transforming business models and service standards. This disruption is happening at an unprecedented pace, as rapidly evolving digital technologies and shifting consumer expectations converge to create a “perfect storm” for insurance companies.
Companies at the forefront of this change are considering how to develop digital networks that support cross-industry opportunities such as traditional life, health, and property and casualty insurance. Opportunities also include coverage and loss prevention services that target rapidly-evolving lifestyles like travel, ride sharing, short duration rentals of scooters, and many other possibilities.
To succeed, insurers must adopt a “digital-first” approach. Doing so increases proximity to customers, leading to increased retention and potential market share growth. Taking this approach can also lead to better customer engagement, giving insurers a critical advantage in a hyper-competitive market.
Three Major Trends: What Insurance Companies Need to Know
Three key trends are reshaping the insurance industry. First, insurers are managing risk better by shifting from financial loss compensation to risk reduction and prevention. Second, digitization is now the norm. Technologies including the Internet of Things (IoT), machine learning, artificial intelligence (AI), blockchain, cloud computing, and analytics now impact end-to-end processes such as underwriting, pricing, claims, and delivery. Third, insurtech disrupters are reshaping the playing field by challenging established providers to rethink their customer relationships and every component of the value chain.
By 2025, many insurers will have transformed their businesses to engage with cross-industry ecosystem providers – the culmination of these key trends.
Is Your Insurance Company Ready? Making the Case for a New Business Model
By 2025, insurers will deliver personalized solutions at scale, and as a service to their customers. Most insurance companies’ revenue will come from services delivered around, and based on, highly customized, digitalized products that support cross-industry ecosystem requirements. These services will span from simple cross-sell and up-sell services to complex underwriting risk models that will be tailored to a wide range of situations that call for risk mitigation and prevention. To capitalize on the potential of these services and new digital network economies, insurers must redefine their core competencies and rethink their business strategies.
Digital engagement, protection services, and data-driven insights are key to making the shift from risk management to prediction and prevention. Over the next year, 90 percent of large enterprises will generate revenue from data as a service, including the sale of raw data derived through metrics, insights, and recommendations. Still, less than 10 percent of data is used effectively, and only three percent of data meets basic quality standards. While digital engagement, protection services, and data-driven insights are critical to business success, getting started on the right path can be tricky.
To learn more, download the white paper, “The Intelligent Enterprise for the Insurance Industry.”
Digital transformation opens a world of opportunities for insurance companies to become partners in their customers’ lives. Insurers that successfully leverage the power of digital platforms will secure a new generation of customer loyalty.