As the world becomes increasingly digitised, the insurance industry has become one of the most rapidly evolving sectors and technology is playing a major role in that evolution. Artificial intelligence (AI), data, and the internet of things (IoT) are revolutionising the old “wait and pay” business model, where an insurance company’s purpose isn’t just to pay claims, but rather proactively try to prevent them. By embedding innovative technologies within decision-making processes, insurers can now offer more personalised experiences for consumers while opening up opportunities for engagement and data-driven risk management.
This represents a fundamental shift in the way insurers interact with consumers across the value chain. And as these technologies continue to evolve, they will have an even greater impact on the industry— transforming it into a truly digital enterprise. However, as the insurance industry undergoes this digital transformation, insurers need to think beyond simply digitising their product offerings and truly focus on creating value for their customers.
This will require developing distinctive capabilities and expanding into new areas. Leveraging technologies to create more innovative products, solutions and customer engagement models will be the key driver in helping insurers fuel more growth. Change is happening whether insurers want it or not. Historically, this industry has been slower than most to make significant changes to how it does business, but has started to change. In Deloitte’s 2022 insurance industry outlook survey, almost 7 out of 10 senior insurance executives said they planned to increase spending on data-related technologies. So how can insurers rethink their business models to compete in the current climate and position themselves for future growth? Here are 3 key priority areas insurers should focus on:
1. Adopt a customer-centric mindset
In order to compete in the digital age, it is essential for insurers to build a data-driven organisation that can quickly respond to customer needs. Many insurers digital efforts are still focused on improving operational efficiency instead of creating new value for customers. Though foundational capabilities should still be a priority, insurers need to better leverage digital investments to improve customer experience. Increasing customer expectations mean that insurers must do more, and they need to build digital, data-driven organisations with the customer at the centre of everything they do.
This will require a shift in mindset, as well as the development of new capabilities and processes. Digital-savvy consumers are looking for more personalised products and insurers who leverage real-time data and analytics to understand their habits, behaviours and preferences will be able to better manage risks, dynamically adjust pricing, and continue to drive down costs. Investments in these technologies can also help pave the way toward increased customer loyalty and engagement, ultimately helping shift perceptions in the way consumers think about the value of insurers.
2. Expand capabilities with partnerships
In a rapidly changing business landscape, it is more important than ever for companies to find ways to collaborate across industries in order to stay ahead of the competition. A recent report by Deloitte found that insurers need to focus on developing collaborative partnerships with other companies in order to expand their capabilities. Insurers must ensure they can integrate with third-party platforms, distribution partners and insurtechs to take advantage of AI, and other data driven technologies. This includes partnering with traditional competitors, as well as with emerging medtech and insurtech firms.
By working together, these various businesses can create new products and services that meet the needs of customers in a more relevant and effective way. In today’s economy, those companies that are able to adapt and work together will be the ones that ultimately succeed. By challenging current insurance models and aligning with other ecosystem players such health data providers, insurtech companies or eCommerce platforms, insurers can create innovative solutions that address market challenges in a more comprehensive way. Strategic partnerships will be essential in order to access the necessary data and technology as well as reach customers in new channels and stay ahead of the competition.
A recent PwC survey of financial service professionals highlights the need for increased collaboration to drive competitive advantage for insurers.
Source: PwC’s Global Financial Services Survey
3. Rethink outdated business models
Traditional business models are being disrupted by new entrants, customer expectations are rising, and technological change is accelerating. To succeed, insurers need to rethink their value chains in the context of digital services that are adaptive, agile and convenient. While the traditional insurance model is based on risk pools and actuarial tables, technological advances in data collection and analytics can transform the way companies manage underwriting, risk management, straight-through processing, policy decisions, fraud reduction programs, claims validation and more.
As our understanding of health and wellness continues to evolve as an example, so too does the role of insurance. Today, insurance is no longer just about protecting us from catastrophic events; it’s also about helping us live healthier, happier lives. And as the focus continues to shift from treatment to prevention, we can expect insurance to become even more personalized. Insurers are increasingly integrating health metric tracking, advice, incentives, and health and wellness platforms to help consumers achieve better outcomes.
In a rapidly changing world, insurance companies must continue to invest in digital capabilities to stay competitive. We are seeing a sharp increase in digitization efforts across industry functions including distribution and claims. And while a competitive digital strategy is needed for differentiation, many insurers are still slow to change. However, Insurers that embrace these opportunities, are not only differentiating themselves and staying ahead of the competition, but positioning themselves for sustainable growth in the future.
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