Insurtech firms, powered by artificial intelligence (AI), machine learning (ML) and the Internet of Things (IoT), have caused an upheaval in the insurance industry. These nontraditional players have created a new class of offerings that range from capturing behaviors, such as personal driving habits and data from wearables, to preventing loss by using IoT sensors to monitor environmental conditions such as humidity and temperature.
To ensure relevancy and competitiveness, insurance incumbents should take a fresh look at how to apply new digital capabilities to their own value chains — including their products, distribution methods and service models. Based on our work with insurers, we suggest companies pursue three primary digital-engineering goals and share recommendations to achieve them.
1 Gain first-mover advantage
The first company to introduce an appealing product gains a potentially sustainable competitive advantage. To be first to market, insurance companies need to anticipate customer desires for products and experiences before those desires are even expressed. They also need the right tools, processes and infrastructure to quickly convert these customer insights into products.
Examples of recent innovations:
- Rideshare insurance that allows drivers to toggle between rideshare coverage and personal coverage.
- Life insurance products that provide discounts to customers who wear activity monitors and that offer connected learning to educate customers on healthy lifestyles.
- Apply human science to learn how customers would like to access products, and identify any gaps in current offerings.
- Build what will differentiate; buy the rest. To support the buy vs. build decision, determine the value chain components that differentiate your offering (see Figure 1).
- Modernize the product architecture. Deconstruct monolithic applications into microservices that can be swiftly snapped together to introduce and distribute new products through new channels.
We helped a large P&C insurer modernize its outdated quote-to-bind to accelerate new feature introductions and improve the user experience.
- Solution: Within a year, the rebuilt application included a cloud-native architecture and was rolled out across many U.S. states using a platform as a service (PaaS) cloud model. The solution resulted in 50% shorter release cycles and new feature introductions. And the company attained an 80% faster quote-to-bind process.