These are fascinating times to be an insurer. Radical changes in the core business model of selling and providing personal and commercial insurance continues, as ageing customers, digital technologies, disruptive channels, declining loyalties, not to mention the rise of the sharing economy (less people owning things...) all means the premium mix is shifting. But at its core, insurance is a business fueled by information and the winners of tomorrow will unlock it, accelerate it and derive meaning from it.
My take is that insurers that are stable and mature will either lead, or brace reactively to accommodate extensive and ongoing disruptions in their business models, markets, processes and the new ways customers want to engage. Will social media drive disruption? Will mastery with data enable firms to totally reimagine a customer experience and accelerate new product development? How will an insurance company “share” data safely or partner effectively within consortia that are capturing emerging market opportunities from the rise of the smart product economy as the internet of things (IoT) builds out?
The Internet of Things will dramatically impact insurance. Take the life and pensions insurance market for example. IoT form factors range from “wearables” (devices, watches, fitness bands) that create an “Internet of Self” to the sensors installed in our cars, our homes or in the collars of our pets to track their location. At its root, the IoT creates an explosion of real time information and data which could provide unprecedented value for an insurer. This information—or data—about customers, their lives, their health, their preferences, and their investment objectives is beginning to emerge everywhere. Collecting it, sorting, storing, analyzing and sharing this data throughout the value chain, calls for new levels of organizational agility and efficiency.
My take as the smart product economy takes hold is to watch as the IoT sparks an era of innovation as the Connected Home, the Connected Car and the Connected Life begin to move into focus. Make no doubt that the operational model for an insurance company needs adjusting for the digital age. You can read Cognizant’s take on how you can future proof insurance in more detail but just think about how peer-to-peer recommendations, automated processes and user-based risk profiling will significantly alter the overall market dynamics. By keeping an eye on the future, insurance companies can improve their bottom lines and transform the way their core systems (e.g., policy administration, underwriting, distribution, billing and claims) are managed and extended.
Fundamentally, insurance is about foreseeing the future and understanding the probabilities. How can leaders innovate to drive better customer interactions while also ensuring more agility, less risk and enhanced loss ratios? Analytics can make processes smart — either through predicting or preventing problems, or reacting fast to changes in the market. Moving forward, insurance companies will need to realign their business models to fit (and anticipate) ever-changing market realities as the IoT builds and the smart product economy forms. Agility and the ability to revamp the foundational structure of operations hold the key to adapting core processes to the challenge of successfully managing amid continuous change.