Hardly have insurers come to terms with the need to digitally transform P&C and Life businesses than they are challenged to confront industry “ecosystems”. The two are interconnected.
On one hand forward looking incumbent insurers are beginning to deploy digital processes over more and more of the business. On the other hand, new kids on the block like Lemonade, TROV, Ladder and SLICE are digitally competing in “low hanging fruit” product categories such as;
- Home rental
- Gadgets and electronics
- Trips and travel
Looming over these tactical successes is strategic disruption that requires far-sighted and brave CEOs and C-Suites to anticipate future markets, customer usage and behaviour and the enterprises & organisations that they will need to partner with. These latter will form: -
- significant ecosystems
- competitive disruption
- new industry leaders
- dynamic changes in distribution between B2C and B2B
Take the move to autonomous vehicles
- Self-driving cars and trucks on highways and roads especially between 2030 and 2040
- Starting in cities and on major intercity motorways
- Encouraged by Smart City projects and government support
- Encouraging consumer vehicle rental by the trip rather than vehicle ownership
- Meaning more vehicles owned, operated, maintained and replaced by organisations
- Transforming auto insurance away from vehicles to trips
- And interconnected supply chains to industry groupings or partners.
Insurers must choose the right partners to be part of the dominant ecosystems if they are to remain leaders in their fields. The ecosystems will result in new technology stacks and who will own these? Sticking to the autonomous vehicle theme.
- Fleet owners and operators- will they dominate the industry and bundle insurance by the vehicle and/or the trip?
- Auto manufacturers- will they become software companies rather than vehicle assemblers?
- Rideshare companies- will auto manufacturers acquire them to control urban driving?
- Autonomous driving software vendors- will they “drive” progress or will auto manufacturers?
- Smart city government- infrastructure, urban planning and patterns & journeys will become key success factors for trip safety, efficiency and enjoyment
- Consumers and travellers- to rideshare or to work from home- behavioural changes will speed up.
- A widening gap between urban autonomous driving and rural self-driving
- The connected vehicle, commuter, home and pet as part of a move to preventing and mitigating risk rather than paying out after the event.
Where will insurers fit in this changing landscape and the rise of evolving ecosystems? They need to establish their place and importance if they are not to lose competitive advantage.
One such competitive strength should be analytics.
“Insurers have strong analytics capabilities compared with their peers in other industries; analytics has been a core component of the traditional insurance business model. Digital ecosystems offer traditional insurers valuable opportunities to use analytics to evolve and expand their business models. They could facilitate the evolution of existing insurance businesses by advancing risk assessments, for instance, by considering safety measures such as connected-home solutions. Insurers can also use analytics to enhance pricing and risk-accumulation control.”
McKinsey “Insurance beyond digital: The rise of ecosystems and platforms” January 2018
Insurers could have the opportunity to be the de facto providers of “Analytics as a Service” to these growing ecosystems. Sourcing, joining and analysing data from: -
- Connected cars
- Connected trucks
- Connected drivers and passengers
- Connected homes
- Connected travellers in vehicles, planes, ships
The first stage of maintaining competitive advantage is to wrap digital platforms around P&C and Life core systems to transform products, services and supply chain delivery to existing customers. Platforms that include analytics with secure self-serve MI.
That gives insurers the platform (sic) to be important partners in these new ecosystems.
An going drive toward digitization has put the insurance industry on the verge of a paradigm shift. The pace of change has accelerated thanks to tremendous increases in the volume of electronic data, the ubiquity of mobile interfaces, and the growing power of artificial intelligence. In the early years, companies that digitized were at the forefront of the industry. Today, digitization has permeated every level of the competitive landscape. Society’s growing reliance on digital technologies is not only reshaping customer expectations but also redefining boundaries across industries. Insurers cannot avoid this phenomenon: as traditional industry borders fall away, the future of insurance stands to be greatly influenced by platforms and ecosystems.