Revival of Insurance:  Accelerating Growth and Market Leadership with New Products and Business Models 

As the industry continues a new digital awakening and adapts to market changes, new customer expectations, and global demands, those insurers willing to adopt a different mindset and leverage the latest technology to accelerate growth will accelerate their growth and position themselves in a new era of market leaders.

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Spring.  The season for rebirth.  Revival.  Rejuvenation.

We see the first colors—yellow daffodils, green grass, purple hyacinths and white flowering trees emerging. Spring is the start of something new.  Out of long winter days, snow and bone-chilling cold emerges the new ideas and energy.

And Spring 2021 is unique and more powerful, as not only are we emerging from the winter but also from the COVID pandemic, where hope and the start of something new is budding.

2020 saw the constant threat of disruption, expanded and accelerated due to COVID and its continuous ramifications to the economy, businesses and individuals. Now, nearly a year after the emergence of COVID, companies—both insurers and their customers—realize it will never go back to “normal.” As insurers step into the post-coronavirus future, they need to find a balance between what worked before and what needs to happen to succeed in the next normal. And that will take leadership.

The necessity of insurance digital transformation has obliterated any lingering doubts as a result of the pandemic. With rare exception, operating digitally is the only way to do and stay in business. It’s transform digitally, or die.

Leaders know they can’t assume the customers they serve today will need or want the same products and services tomorrow…or that the same customers will even be there tomorrow. Leaders are constantly monitoring the changing demographics and dynamics and making short- and long-term adjustments to adapt and thrive in an ever-evolving market.

Andreessen Horowitz, a renowned technology consultancy, noted in its blog, “2020 has shown us that every company—no matter their industry or size or age has to become a technology company to survive.” While many leaders are not technical experts, they understand the business value and impact of technology on the business, not just today but in the future. They recognize they must re-envision their future with new products and business models that will accelerate growth and position them as leaders in the digital age of insurance.

New Market Opportunities with New Products

The COVID crisis seemed to come out of nowhere, blindsiding the world with the force of a tsunami. Suddenly, the “usual” way of doing things no longer worked. We have seen this before with other major events or crisis.  We learned that adaptability to a new market reality is the path to new opportunities.

Brokers and employers faced a new reality this past employee benefits open enrollment season—and they adapted.  The pandemic highlighted the need for specific voluntary benefits based on the market and customer dynamics.  In a recent BenefitsPRO article, they note that new data from Aon shows that employers increased offering voluntary benefits by 27 percent during the past enrollment period.  In particular, demand for ID protection (likely due to more employees working remotely), short and long term disability, and life insurance led the increases by upwards of 10-40 percent.  Furthermore, supplemental benefits including accident, hospital indemnity and critical illness saw significant growth as new benefits offered by employers.

Likewise, we saw a surge in buying individual life insurance, particularly term or whole life. The value and importance of it rose to the forefront particularly for the younger generation. In our customer life insurance research, we found 79 percent of Millennials and Gen Z were ready and willing to buy life insurance. However, their expectations on the product and experience were vastly different. Companies such as Haven Life, Ladder Life, Lemonade and others offering a digital, easy and fluidless buying experience saw tremendous growth. Fast-forward and many traditional life insurers are now looking to launch new term and whole life products and business models that adapt to a new reality.

The pandemic had a huge impact on auto driving in 2020, resulting in a growing market opportunity for insurers to accelerate offering UBI auto insurance. It has been noted that telematics data and the significant drop in driving due to the stay at home requirements early in the pandemic were a key reason insurers could return money quickly to customers, which subsequently has driven increased interest in UBI insurance by customers—and insurers who do not currently offer it.  According to a study from Allied Market Research, the usage-based insurance market is projected to jump another 25 percent by 2027.  Those with UBI offerings (and several entrants are coming to market now, such as Farmers’ new commercial auto usage-based program called FairMile) are positioned to capture this market opportunity as auto owners shift from traditional to UBI insurance.

Due to significantly changed customer behaviors, needs and expectations as well as the use of technology during the pandemic, we are now seeing the emergence of new or reshaped businesses. Some of the industries poised for growth include e-commerce retailers, online groceries, e-learning, dark kitchens, reshoring of supply chains, virtual meetings, augmented reality and much more. Many of these will require new products and services to cover their businesses and the new risks associated with them.  At the same time, nearly all businesses have increased their digital presence, increasing their cyber risk and demand for cyber coverage.

New Market Opportunities with a New Business Model

In today’s dynamically changing market, there are a growing number of unserved and underserved markets, often driven by new industries, innovative new businesses, technology, and shifting customer demographics. Instead of fighting for the same market share, capture and grow new market share. A startup mindset will give teams less fear about entering untried or untapped markets.

New and untapped markets are increasingly supported by greenfields and start-ups. Similar to the post-financial meltdown and the emergence of InsurTech, we are continuing to see new business models—but increasingly from existing insurers as a greenfield. At the same time, we are seeing the “doubling down” on investment in greenfield start-ups or acquisition by existing insurers.

Home services platform Porch’s acquisitions are accelerating their new business model of providing homeowners insurance with a range of value added services—creating a new customer experience that also helps reduce risk.  Next’s acquisition of Juniper Labs will expand its predictive analytics and data science team to leverage the expertise across their portfolio of insurance products—providing enhanced underwriting to claims through data. And then Lemonade is expanding into life insurance with a new offering that leverages the platform from Bestow, a digital life insurance company. These companies understand that the risk product is only one piece—that the digital experience and value added services are equally important for a new generation of products and business models.

In these examples, the digital business models are continuing to expand and adapt to new market opportunities across a spectrum of products for individuals and businesses. These greenfields and start-ups have new business paradigms that are continuously tested, growing, adapting and maturing—but at speed unseen by most traditional insurers.  They are applying a healthy mix of entrepreneurial energy and digital expertise to traditional insurance wisdom.

Market Leaders—New Generation with Accelerated Growth

The shifting market and competitive landscape, low growth, narrow margins, high operating costs, declining customer satisfaction and slow speed to market for new products place many insurers further behind those leaders introducing new products and business models that are capturing new market opportunities and growth.  This new generation of leaders are outpacing them on so many fronts, placing traditional insurers in an increasingly challenging position.

Early data from the AM Best Innovation Assessment in March 2020 noted that there is a correlation between innovation and operations.  Those insurers with the best operating performance have better innovation scores and those with the highest overall financial strength ratings have higher levels of innovation.

In our new Strategic Priorities research, we found that those who are focused on new products and business models along with expanding channels, moving to cloud platforms and reallocating resources to focus on changing how they do business are well positioned as a new generation of market leaders.  In contrast, Laggards are significantly behind with a gap between them and leaders of 103 percent and for Followers that gap is 28 percent.  This gap reflects a focus on the past, rather than the future – a dangerous blind spot for insurers who want to remain viable and relevant in fast-changing marketplace. It will take leadership and revival of the insurance business model to succeed.

Spring is here. A new normal has arrived. There is no turning back to “normal.” Bold moves that embrace the “new normal” will define the next generation of leaders in the insurance industry.

As the industry continues a new digital awakening and adapts to market changes, new customer expectations, and global demands, those insurers willing to adopt a different mindset and leverage the latest technology to accelerate growth will accelerate their growth and position themselves in a new era of market leaders.

Are you ready for a new era of insurance?  Are you looking at the opportunities for new products and services that meet a changed marketplace?  Are you prepared to launch a new greenfield business model to provide a new foundation for your future?

Are you ready to emerge a leader in this new era of insurance?

What we can tell you is that your competition—current and new—is actively emerging from the past year with ideas, energy and commitment to the future of insurance.  The buds of new era of insurance are blooming all around us. Open your eyes and see the opportunities!

Be sure to listen to our podcast, Respond, Recover, Thrive: A Digital Transformation During a Crisis – Part 1, where Dave Schmitz and Abhishek Bakre from Deloitte and Denise Garth from Majesco discuss how group and voluntary benefits insurers are transforming their operating models to take advantage of the new market opportunities.

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Denise Garth // Denise Garth is Chief Strategy Officer responsible for leading marketing, industry relations and innovation in support of Majesco’s client centric strategy, working closely with Majesco customers, partners and the industry. She is a recognized Top 50 InsurTech Influencer and industry leader with both P&C and L&A insurance experience as a CIO and business executive with deep international ties in Asia and Europe through her ACORD leadership role. Denise is an acknowledged strategic thinker, innovation leader, international speaker, and author of thought leadership and articles regarding the key issues and opportunities facing the industry today to prepare for the future.

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