Digital Disruption in Insurance.Each time I look at a client-based industry, I'm amazed at the transformation as it unfolds. Disruptive startups never just 'improve' the current way of doing things. Instead, they focus on changing the game entirely. It's the core reason why the inventor of the digital camera at Kodak couldn't use the new tech to its advantage to transform the photography industry. Almost no industry is immune to this threat, as enterprise grade technology is easy and affordable to deploy, enabling the foundations for creative problems solvers to re-frame an industry's purpose, almost in an instant. The insurance sector is not exempted from this as digital and new technologies are creating disruptive threats to the business. The insurance industry is a century old business, and not much has changed with the way it does things. Most of the trends in the insurance industry now are either technology-related or technology-driven. The majority of these trends has low market penetration and will take a few years for mainstream adoption, with more threats in the distribution and unitization of risk products. The main challenge that insurers still face is that they rarely distribute their own products, leaving the task to their agents. This arrangement has worked for the industry in the past, but for the present time, it isolates them from the voice they need to hear the most, the 'customer'. This opens opportunities for startups to enter the industry. Take a look at the core trends in the market.
Analytics and Customer CentricityAs part of the larger trend wherein huge amounts of data are turned into actionable analytics, insurers will begin to reap the benefits of these efforts in 2016. It's a significant change recognizing the need that the orientation of the industry has to change from being focused internally to externally focused. Increasing customer knowledge is a fundamental part of providing an effective omni-channel experience which allows insurers to identify opportunities for cross-selling products and services that they have not had the ability to identify in the past. This will be important in 2016 as consumers will increasingly dictate the terms of engagement with their insurance companies, a fundamental change in the industry.
Digitization and PortalsAnother important area for insurers in 2016 — and one that is part of the macro trend of external technological developments which strongly impacts the industry — is continued digitization and the pressure that it puts on carriers to improve their digital capabilities, particularly with portals and mobile applications and services. This marks a shift from the industry's emphasis on websites over the past several years, which to millennials and other influencing demographics of customers are just too inconvenient to use. Insurers have begun to catch on to the idea that their customers of the future will be channel agnostic, or better yet, will dictate what kind of channel to use and when to use it. That’s a big change for the industry. One that is coming. Those insurers who can dedicate time and resources to it in 2016 may find themselves ahead of the game, and ready for the customers of tomorrow.
Cloud and Software as a ServiceLeveraging the cloud for the types of IT activities that don't directly add value to the ultimate customer experience will continue to be a focus area for insurers in 2016. As part of the movement toward customer centricity and digitization, insurers will accelerate their use of cloud-based solutions,including software and infrastructure as service offerings. The primary motivation for insurers to push for these initiatives is the potential to streamline their architecture, infrastructure and application portfolios, all as a way to be able to focus more IT resources on the kinds of initiatives that positively affect customers and agents in a directly. It will include things such as more intuitive user interfaces for agents and customers, and real-time access to policy and claims, information, and updates.
Telematics and Usage-based insuranceTelematics and usage-based insurance are among the hottest topics in Auto insurance and for good reasons. As the promise of more granular pricing segmentation and improved pricing accuracy by using actual driving behaviors as the basis for rates, has auto insurers stepping over each other to get there first. It's a safe bet that there will be broader adoption in 2016 as carriers see the value proposition inherent in usage-based insurance,such as customers overcoming their trust issues. There are additional considerations for insurers around provisioning devices for customers, collecting the data from the devices and on the uses of the data once collected. Those are all questions of how to implement, however. With that said, for those insurers moving forward with Telematics, decisions has to be made. The key questions for insurers in 2016 on migrating to Telematics will be when and how much?
Core Modernization and InnovationA lot of good work has been done in the industry, but those insurers who have not yet started their journey to more-modern systems will not only find themselves at an increasingly competitive and functional disadvantage in 2016 and beyond, but also insurers' potential for offering innovative services will be severely limited. The important thing about core systems modernization is not the updated functionality and stability the new platform brings, rather the foundation it creates to allow insurers to do many other things. New and modern core systems simplify the traditional IT resource time spent on activities such as maintenance, updates and ability to configure. Insurers need to be smart about how they'll use that "found time" in their IT and business functions, and devote that time and those resources into their innovation efforts. With that said, insurance technology is a broad field that includes all different types of insurance, distributors, risk and regulatory managers, big data and enabling technology.
Who is Disrupting Insurance?Here is a list of the top 3 insurance startups worth keeping tabs throughout 2016.
- PolicyGenius is trying to make the process of buying individual insurance more enjoyable. Through education and easy-to-use tools, users can determine what type of insurance they need, compare costs from different carriers, and consult with experts if they need them.
- Oscar uses technology to simplify the entire health insurance experience. You can use the app to talk to a doctor and get prescriptions without ever leaving home. You can also keep track of your health history with a timeline and earn rewards for staying active with a free Misfit step tracker.
- Zenefits is free online HR Software that gives your team a single place to manage all your human resource needs - payroll, benefits, compliance and more. Singapore based Connections Asia is on a similar journey, attracting some of the most innovative companies as clients. In all, 2016 has the potential to be a more transformative year for the industry than the past few, but that will only occur if insurers stay focused on their most important constituents — agents and policyholders — and on the external technological and social forces impacting the insurance industry, either positively or negatively. Can the incumbents find their way through the tidal wave of these threats?