How insurers can profit from the disruption shaping the future of the industry
The world in which insurers operate has changed dramatically. They are being exposed simultaneously to the explosive disruption caused mainly by technological innovation, and compressive disruption that is slow, insidious, and squeezes growth and profit.
To deal with this combination they need to pivot to the new – transform their core business to improve growth and efficiency, use the funds freed up in this way to explore and scale new sources of value, and then gradually and prudently shift their focus from the core to the new.
Most insurers know all about this disruption, and acknowledge the need to change. Many have invested in the new digital technologies that are transforming the industry. Yet Accenture research shows that only 6 percent have achieved the financial impact they were hoping for. For the vast majority, the value remains trapped.
An important reason is that the investments have tended to be piecemeal rather than part of a holistic, enterprise-wide digital transformation strategy.
Insurers ought to rethink their business models, looking beyond insurance and the traditional ways of meeting customers’ needs. In the light of this they must revisit their operating models – not only the technologies they use, but also the people they depend on.
A successful pivot is a difficult balancing act. Insurers must tap into new data sources and gain deeper, more accurate insights into what customers want. They need to free themselves of the mindset that shaped the industry over past centuries. And they need to overcome the obstacles of legacy systems, which impede agility and the ability to change.
To unlock the trapped value there are four key capabilities, driven by technology, that they should be investing in:
- Engagement – those that touch their customers
- Insight – the gathering and analysis of information for decisions
- Record – enabling the core transactions that run the business
Offerings too will change. Massive technological advances such as the Internet of Things will allow insurers to introduce personalized, real-time protection services that expand their relationships with customers and give them good reason to engage much more frequently.
As autonomous vehicles and ridesharing become more common, the demand for “episodic” insurance for specific events or periods of time will grow. And there are new underwriting opportunities in areas ranging from cyber-insurance to drone policies and asset sharing.
Insurers need to consider what this all means for their workforce. Advanced technologies such as robotic process automation (RPA) and artificial intelligence (AI) will free workers from repetitive tasks and let them focus on adding value in areas such as problem solving and customer interaction. This, however, means not only equipping workers with new skills, but changing long-standing cultures so that the whole organization understands and supports the insurer’s vision of the future.
Insurers that get these challenges right will be in a position to explore tremendous opportunities.
At the macro level, four billion people – or about 55 percent of the world’s population – are still uninsured, and carriers around the globe are actively seeking ways to work with this enormous potential market.
We like to think Accenture is right at the center of all this transformation. We help insurers make the right decisions about strategy, technology and operating models. We advise on various technological solutions, on choosing the right partners, and on implementing and integrating the solutions once they are selected. We assist them in defining the workforces that will be needed for the future of insurance, and in finding, developing and managing these new talent pools.
More and more often, we are helping insurers identify possible sources of disruption and pivot to the new in terms of analytics, AI, cloud and other technologies to become disruptors themselves. Digital transformation is a huge opportunity for insurance industry leaders and we are fully engaged in helping them realize its full potential.