(Concept rendering of Nixie, a wearable drone that unfolds for flight. Photo credit: Stefan Niedermayr.)
Speed-to-market has rightly been one of insurers’ chief preoccupations in recent years, but a new report by SMA (Boston) Emerging Technologies: Five Key Themes for Insurers, cautions insurers that the speed of the market is even more critical. The research and advisory firm’s report examines the emerging technology landscape, drawing a distinction between those that resonate in either the physical and virtual realm; it presents a broad range of examples and then examines those that are especially important to insurers’ fortunes.
Theme 1: Speed OF Market
While tactical agility remains a vital concern to insurers, they must also heed the pace of change around them, the report urges. “The rate at which emerging technologies are advancing is much faster than many people expected or thought possible,” author Mark Breading notes. Tapping SMA research as to when at least 30 percent of insurers say they believe a given technology has the potential to effect insurance industry transformation, the report presents the following technologies on a timeline for P&C and life insurance respectively:
- New Payment Technologies
- Internet of Things (IoT)
- Wearable Devices
- Drones/Aerial Imaging
- Driveless Vehicles
- Semantic Technologies
- Artificial Intelligence
Theme 2: Emerging Technologies Create Both Opportunities and Threats
The essence of disruption is the proliferation of both threat and opportunity, the report suggests. Among the opportunities for insurers is the potential to increase the frequency and depth of touch points with customers. Threats will likely come in the form of non-traditional competition and a changing liability environment triggered by manufacturers including IoT capabilities into products and services.
Insurers also face the challenge of supporting the new levels and kinds of data processing implied by the IoT and other emerging technologies, according to the study. “The technology infrastructures of insurers must undergo massive change to accommodate the massive volumes of data related to wearables, IoT, driverless vehicles, drones and other new data sources in the connected world,” Breading writes.
Theme 3: Insurers Must Convert Potential into Value Propositions
The sky may be the limit when it comes to the opportunities enabled by emerging technologies, but insurers must convert that potential into concrete business use cases, the study cautions. The SMA report offers a graphic showing a wide range of technologies and their potential impact on various links on the insurance value chain.
Theme 4: Data is Central but Worthless Unless Leveraged
Data is the “natural resource of the digital age,” but to derive value from it, insurers must first develop a plan for how to use business intelligence, advanced analytics and big data technologies, the report says.
Theme 5: Innovation is Essential but Must Be Turned into Action
Disruption calls into question the status quo and creates a volatile state in which new creative thinking can derive value. That will require both creative thinking and prudent application—which are difficult, the report cautions. “Senior executives and strategists must play different roles than they have in the past,” Breading writes. “Instead of top-down strategies conceived only by senior officials, the approach now must be to create and innovation ecosystem and guide the process from ideation to execution.”
In the report’s call to action, Breading counsels insurers to think about adapting to the changing technology environment across the categories of innovation, customers, partnerships, employees and technology. On the latter category he warns that as insurers embrace a very new technology world that they not lose focus on core insurance system issues: “Everything is grounded in and dependent upon these systems,” he stresses. “Leverage cloud models and strong vendor partnerships for rapid implementation and maximum flexibility.”