Always dangerous to predict a #1 insurtech trend! Do you mean this year tactically, next two years' priorities or long term strategic trends that may reshape the industry?
My key point is that short-term decisions and plans predicate the future and long term strategies must be planned now. Making things more complicated the old order of development and innovation has changed.
McKinsey's Three Horizons provided an incredibly useful taxonomy. The model described innovation occurring on three time horizons:
- Horizon 1 ideas provide continuous innovation to a company’s existing business model and core capabilities in the short-term.
- Horizon 2 ideas extend a company’s existing business model and core capabilities to new customers, markets, or targets.
- Horizon 3 is the creation of new capabilities and new business to take advantage of or respond to disruptive opportunities or to counter disruption.
The issue is that insurers often still act as if Horizon 3 takes 36 to 72 months whilst the truth is that it can take just weeks. Literally 6 to 12 weeks from the broad idea and sometimes less. Major changes can be made fast whilst market forces at the same time trend ver longer timelines.
So where do ecosystems fit in this model?
Insurers recognise a trending move to prevention rather than cure. Autonomous and safer electric vehicles combined with ride-sharing and a move to fleet ownership will change auto insurance. Will it be embedded in the trip price or covered by product liability insurance? Insurers must plan now for a completely new model and decide if they are to be an "Ecosystem Leader" or just a partner.
They may not have a choice- Toyota with its Mobility Strategies may just decide which insurers will be part of its ecosystem. Muddying the waters they may decide reinsurers are more important and digital giants play a bigger share.
As insurance moves away from cure (sharing risk and putting customer's lives and assets back together) to prevention it moves away from its current core strengths and competitive advantage. It moves directly into the fire of reinsurers, digital giants, systems integrators and manufacturers & OEMs ... the list goes on. Insurers must change their modus operandi and this makes them more vulnerable to disrupters and evolving competition.
Insurtechs were once viewed as disrupters whilst today they are increasingly viewed as technology enablers for incumbent insurers. To deliver that promise they must deliver platforms that support the here and now and the long term future. For all markets, products and perils. One platform all sectors without large investments each time a new product or market is added.
Whilst insurers play out this longer term strategic change they must also deal with this year and next. Customers may once have accepted modest improvements in UX and journeys but patience is wearing thin.
They must see significant improvements in the buying and mid-term modification of policies. In the range of products from annual cover to insurance as a service. When they really need help, making a claim, they need the optimal mix of speed and human empathy.
So are ecosystems the #1 trend in 2019?
The #1 trend is to combine all these priorities into a matrix of deliverables that complement each other. For that you need technology partners that deliver significant innovation this year, the platform for next year and a "future-proofing" platform for the ecosystem and partners that you wish to shape over the next five years.
Over-hyped technologies like AI and Blockchain are just components of this evolving picture and yet presented as major solutions. They are just a part of the technology jigsaw and stacks that will be integrated in digital insurance platforms to be leveraged by the small number of incumbent insurers that can credibly claim to have the strategies that will deliver market leadership in 5, 10, 20 and 30 years time.
Of course every journey starts with small steps which is why the DIA article is insightful and the Mobly example a good one. Strategy is key and it would be a good idea to challenge your current strategies. One step is to apply a process like Wardley Mapping.
Far too many strategies are guff- meaningless words parroting what others are saying. If you want to see a humorous expose look at this.
The acid test is that they should anticipate the future we have reviewed above and provide a credible route map to be a market leader in the years ahead.
If you do not believe that take the warning from McKinsey that here will only be room for four or five insurers in each key sector. The remainder will share a very thin and starving gruel of minimal profits or losses. See Exhibit 4 in "Time for insurance companies to face digital reality".
If that's not food for thought I don't know what is.
Platforms where people go to, to solve the challenges they have in life, and the financial and risk challenges that go with them. Think of obvious platforms around home, mobility, work and health. But also of platforms around important life events such as study, marriage, divorce and retirement; important moments in someone’s life that require making important financial decisions. A great example is Mobly, Baloise’s platform in the mobility space. Mobly started helping customers when buying a second-hand car by providing all the relevant information, access to a wide range of service providers and support through a real expert that accompanies you during the buying process. Other mobility services already followed. We believe ‘Ecosystems beyond insurance’ is the overarching trend for the years to come, the mega-trend if you would like to put it that way.
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