(Insurers striving for customer ownership fear competition from non-insurer entities such as Google. Image source: Google.)
Insurance carrier executives believe disruption is coming to the industry and have prioritized customer-facing technology, data analytics, core system renovation and new distribution strategies, according to a new report from the Economist Intelligence Unit (EIU) sponsored by SAP. Based on a global survey of over 300 executives at life and P&C companies, the report found that respondents feared banks and non-insurance entities such as Amazon and Google as emerging competitors.
The majority (60%) of respondents to the EIU report said they expected significant to massive change in the industry, and when asked whether disruption was more likely to occur in distribution service or products, at least 30% saw the potential for disruption in all three. Less than half (46%) said they thought their companies were “well-prepared” for change, and only 25% thought that was true for the industry at large.
Changing Consumer Behavior
Changing consumer behavior was seen as a large driver of change by the EIU’s survey respondents and interviewees. When posed with several statements about the form industry disruption would take, the highest level of agreement was with the following: “Companies that fail to simplify, streamline and improve the buyer’s experience will not survive.”
The report found that customer ownership would be a major issue, and that respondents feared new competition from online service companies such as Google and Amazon most. The report details efforts of both insurers and non-insurance entities to counsel potential customers on their insurance needs. To face the challenge of consumer demand more generally, insurers will invest in customer relations (44%) and digital customer experience (38%), according to the report.
Core Systems, Cloud and Data-Related Investment
However, other technological areas remain crucial for insurers in the near future. The report features insurers migration to configurable package software for core systems, as well as a longer-term movement toward the cloud.
Almost all respondents (86%) said they were either currently making more use of data-related technologies or planned to within the next five years. Among the objectives of wider data sources and more advanced data analysis is the ability to underwrite risks with greater precision, according to the report. Example include automated underwriting for life insurance and telematics-powered pay-as-you-drive programs.
In the longer term, data will drive other telemetry-powered policies and services using machine-to-machine (M2M) technologies, also known as the Internet of things. Emerging capabilities will enable “active risk mitigation, personal risk management and personal loss control,” according to the report.
The report, which can be downloaded for free here, offers the following calls to action. Insurers must:
- Modernize their core policy administration environments, transforming legacy systems to enable market agility, create data transparency and facilitate consistent customer interaction.
- Begin the journey to the cloud, leaving internal systems integrations behind in favor of better-integrated solutions. Insurers should begin small, create a vision and gradually migrate applications.
- Complete their journey to customer-centricity, including creating a unified customer experience that enables communication and transactions seamlessly through all channels, including mobile.
- Accept that Big Data and analytics have the potential to transform the industry. They should begin by moving from batch to real-time analytics, making analytics an enterprise competence and exploring emerging sources of external data.