Trust is fundamental in insurance as it involves selling an intangible product, that consumers do not particularly want or really understand. Despite insurers trying to build trust with consumers, an IBM IBV survey shows that only 43% of consumers have trust in the insurance industry and even less (37%) have trust in their own insurance company. Technology has great promise to help change this.
For a number of years, the insurance industry has been experiencing pressures for change as technology becomes embedded everywhere, connectivity increases and more data is being captured and stored. What is different today is the ability to connect across enterprises as ecosystems become more prevalent, creating a wave of disruption driven by technology-led and connectivity-led companies. Also, it used to take 40 years to adopt a technology (such as telephone, television); now it takes four (e.g. smartphones, HDTV). Adoption curves are much faster, which creates disruption opportunities across value chains.
In the insurance industry, lots of risks are changing and are predicted to change even faster in the future (such as autonomous cars, genome testing). There are also new channels for companies to interact and get closer to customers. Data is also being utilised much more across all areas of the insurance value chain. These are all opportunities for new business models that are potentially very disruptive to the industry.
Insurers see three broad areas for technology adoption: recognise and sense to prevent risk (e.g. IoT, drones, wearables, genome); assistance from interconnectedness (e.g. mobile, blockchain, API economy, biometrics); and insights of new data to interpret new risk values (e.g. analytics, big data, RPA, cognitive).
This new technology, combined with the existing competitive “moats” of the insurance industry (knowledge of risk, longevity, regulatory knowledge), is leading to new innovation models and metrics for insurers. To build these, insurers need to consider five capabilities:
- Scalable and secure – cloud-based IT-as-a-service
- Flexible – platforms, insurance-as-a-servive
- Customer insight – data harvesting and analytics
- Deep engagement – cognitive to build precise advice, pricing and products
- Wide engagement – API, blockchain.
