For insurers, failure is learning—and you need to learn fast.
Published: Nov 14, 2018
Author: Gabriel Schild
No industry is safe from disruption—but what does it mean for the insurance sector? How can incumbents stay relevant and respond to changing customer demands? We spoke to leading Insurance industry executives and innovation experts—and we’re sharing their advice.
There’s a lot of buzz about digitalisation in insurance. But can it really save incumbents from disruption? Imagine if you could go back in time and talk to a company like Blockbuster. You could sell it some of today’s digital technology—helping it revamp its processes and improve operational efficiency. It could implement sensors that detect when customers have picked up a DVD, or use artificial intelligence (AI) to recommend titles and improve stocking. That would have made the business more efficient, customer-friendly and perhaps even more profitable. But it would still have been disrupted when streaming came along.
There’s an important lesson here for the insurance sector. You can certainly benefit from digitising your existing processes. But it’s unlikely that will be enough to stay ahead of InsurTechs and new players like Amazon. Rather than thinking in terms of digital transformation, you should be thinking about innovation. You need to rethink your whole business model and challenge the status quo. That’s going to mean changing your mindset and learning from failure. Because if you don’t, other businesses will take the lead.
How can you truly prepare your company for the future?
Develop a culture of innovation
"We’re seeing a real acceleration in the use of new and different technologies, like blockchain, IoT, data and analytics. It’s forcing us to reimagine how we do things—and how we help our clients manage their risk portfolios."
— Madeline Bailey, Head of Strategic Initiatives, MS Amlin.
81% of insurance executives believe that IoT and connected insurance will significantly or completely change the industry 1. As tools like IoT and AI become mainstream, your customers will increasingly expect exciting innovations—travel insurance policies that activate in real-time when they set foot in an airport, or apps that gamify insurance and reward good behaviour.
They’re also going to demand more personalised policies—and these may cover every aspect of their lives. No more separate car insurance, home insurance or health insurance. Just personal insurance. Coverage could adapt in real-time as possessions, behaviour and circumstances change. Instead of "insure my stuff”, "insure me"could be the mantra of future consumers.
In five more years, we’ll probably see the emergence of entirely new products—the monetization of different kinds of risk insights and intelligence like cybersecurity threat data, peer-to-peer insurance models and blockchain-based smart contracts. We don’t know exactly what the future holds and which solutions will be winners, but we know the status quo won’t last.
That means you need to drive a culture of innovation throughout your organization. You need to stay ahead of the curve by anticipating continuous change—and in some cases, rethink your entire business model to be more responsive. Insurers simply can’t afford to remain risk-averse or afraid of new frontiers.
Build a more agile organization
"Failure is good. It’s a way of learning. And you need to learn fast."
— Susanne Chisthi, Chief Executive Officer, Fintech Circle.
Insurers need to put in place processes that mean their innovative ideas can be realised fast—in weeks rather than months or years. But that’s easier said than done. Especially if you’re being held back by outdated business models and legacy infrastructure. The key is transitioning to an agile working model—and that can mean change for your processes, people and technology.
You should utilise a proof of concept approach, so you can trial new solutions, get them to market fast and see if they work—then scale up if your customers respond positively. And stop seeing failure as a negative thing. Learn from it and move forward.
It’s likely that you’ll need to change your skills profile and recruit new talent with competencies in the latest technology. And you’ll also need an infrastructure that supports agility and can support the latest technology as it comes online. You’re going to need a network that can adapt to your future needs—one that’s completely scalable and responsive. Solutions like software-defined networking (SDN) can provide the performance, flexibility and management you need to stay competitive.
Work with an ecosystem of partners
"There are a lot of digital spaces where you can’t do it alone. The [insurers] that will win are the ones that create the biggest ecosystem."
— Maarten Ectors, Chief Innovation Officer, Legal & General
It’s unlikely you can achieve the required level of innovation alone. Insurers can’t be everything at once—you’re not software or hardware providers, and you may be lacking the agility of smaller players like InsurTechs. That’s why you need to work with the right partners.
Leading insurers are already seeking to build digital ecosystems where all parties benefit from each other’s strengths. Incumbents have vast underwriting experience and large customer bases, InsurTechs have agility, and technology providers like Verizon have the know-how to build a scalable infrastructure.
Don’t fall into the Blockbuster trap. Be ready to embrace the latest technologies—from automation, AI and big data to the vast possibilities of IoT. You can start by getting the right infrastructure and partnerships in place.
Read our series of reports for more about the future of insurance, and the latest insights from insurance leaders and technology experts. https://enterprise.verizon.com/solutions/achieving-business-objectives/future-of-insurance/
Gabriel Schild is the Executive Director Digital Business Transformation at Verizon.