"Innovate or be disrupted" has long been the mantra in industries that have large legacy incumbents, such as travel, enterprise software and banking. Insurance has held out so far, but we see the traditional insurance model coming under pressure from an increasing number of fronts, namely:
- Distribution: With the rise of robo-advisors and more innovative and flexible product bundling, customers are becoming king again.
- Data: Incumbent insurance risk and pricing models are simply not setup to deal with the exponential growth in data that is fast becoming available. IoT will continue to add new data sources, and more innovative machine learning solutions will be needed to make sense of them.
- Delivery: Service delivery, from the claims process to the provision of remedial services such as a hospital bed or car repair, will increasingly become a key differentiator, particularly in the Health and P&C verticals. Carriers who own all or part of the delivery chain will increase customer touch points and feed more data to further refine their models (see previous point).
- Detection: A tightening regulatory environment coupled with increasing masses of customer data will turn detecting fraud and authenticating claims from a stale back office process into a strategic imperative.
Insurance may be widely perceived as a sleepy backwater when it comes to innovation in technology, but that’s about to change. Whether the transformations to come — which we expect to impact the industry on a number of different fronts — end up bolstering a particular insurer’s future or undermining it depends on whether they seize the opportunity to reinvent their business models or stubbornly cling to the status quo.