The insurance industry is in the midst of an unprecedented scale and speed of change. As technology and strategy continue to evolve, business as usual is no longer an option, but neither is it a piecemeal or haphazard approach. Only through complete digital transformation can the insurance industry maintain customer trust and loyalty.
At the same time, the insurance industry must avoid the pitfalls of adopting all new technology without a clear, well-informed strategic vision. Consumers are not fooled by technical gimmicks, especially when it comes to important decisions like insurance.
Distribution is one of the areas where change is bringing a whole new landscape with little reliance on past methodologies. Products and insurance are increasingly packaged for customers, leading to intuitive and frictionless journeys. The automotive industry is at the forefront of this revolution. From traditional automakers such as Ford and Volvo to next-generation disruptors like Tesla, partnerships are being created to provide insurance as part of the car buying experience. Creative strategic thinking has enabled automakers to leverage their strong customer bases to market unique product lines and brand new insurance products.
New markets also require new products and services, and insurers must forge new partnerships to bring them to life. Thus, software, home security, and home repair services are partnering with insurers to offer total packages in new markets, to name just three recent examples.
Changing consumer behavior is a source of both opportunity and risk for those daring to take advantage of it. A notable example is that data is shared with trusted recipients, increasing comfort on behalf of consumers. This trend has led to connected insurance, which has enabled insurers to develop much more personalized coverage and risk management than before.
Data collected from connected devices allows insurers to tailor their products and offer pay-as-you-go coverage to meet the needs and budgets of an amazingly wide range of customers. Additionally, IoT enables monitoring and alerting to further manage risk.
Finally, connected insurance enables much more frictionless customer self-service. Customers are now in control of their journey, saving a lot of time and money.
The product is up to the insurance company. Solutions are all about the customer. Forward-thinking insurers should pivot to the latter outlook.
Not only do each customer have different needs, but those needs come to mind when purchasing insurance. As options and features proliferate, customers are increasingly reluctant to consider insurance products that do not fully consider them. Insurers that offer solutions tailored to their circumstances and needs will win their business and loyalty.
The technology that makes all of this possible may not be directly available to all insurers internally, but there is no doubt that today there is a technology company ready to serve all these needs. There is none.
Technology impacts business models
Before deciding what kind of digital path to adopt, insurers should first identify and build on their core competencies. Technology can then be deployed in the most effective way that maximizes the value of both the technology and the company as a whole.
Of course, identifying core competencies should not be confused with stagnation. Digital transformation can bring about radically new ways of doing business. One of the most innovative is DTC (Direct-to-Consumer or Business-to-Consumer), where insurers sell insurance directly to consumers online. This process is often mediated by insurance aggregators who provide information about multiple insurance companies in one place, allowing consumers to shop without leaving.
This is the inverse of the previous example and illustrates the same point about technology-driven business model shifts where auto companies offer their own insurance packages as part of the sales process.
None of these changes will bring long-term benefits to the company without strategic decisions about exactly what is needed and how the technology employed will bring it about.
New technologies have created new insurance opportunities for both incumbents and insurtechs. Delivering digital experiences and solutions to customers is no longer just an option. This is important for insurance companies that do not want to fall behind. These solutions must be deployed carefully and intelligently to win and maintain customer loyalty and trust.
These changes have been revolutionary and challenging, and as they will continue to be, the ultimate outcome will benefit all parties involved.
Alex Zukerman is Chief Strategy Officer at Sapiens, a software company based in Holon, Israel.
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