The insurance industry stands at a crossroads.
The digital revolution has delivered technologies that can deliver dramatic business improvements for insurance companies – if they are bold enough to take advantage of them.
So here are a few ways that some of the most innovative enterprises & rapid startups are transforming the way they operate.
6 technology opportunities for insurance firms
1. Big data analytics
By collecting data on their users, forward-thinking insurance companies have been able to customise their service to each customer.
In recent years, ‘Executives at large and small carriers alike have been building centers of excellence (COEs), with dedicated staff focused on advanced analytics,’ according to McKinsey’s report.
2. The internet of things
But where does the IoT data come from?
In car insurance, black box insurance has become a category allowing insurance customers to install a telematics device that measures their driving safety and calibrates their quote accordingly.
Additionally, some big data services can tap straight into the products consumers already use because they rely on the internet to function.
Tools such as Fitsense allow life and health insurers to personalise their insurance offers to individuals based on the readings from their fitness trackers.
3. The cloud
The cloud is a catch-all term for a huge variety of business services. Moving their infrastructure, including high-performance computing and modelling, to the cloud allows insurance companies to update and streamline their infrastructure.
This improves the efficiency of their employees and saves money.
4. Machine learning
As machine learning tools have improved, so they have become more applicable to the insurance industry. These tools tap into big data pools and help make data analytics more effective. This could provide huge benefits to firms in meeting compliance needs, reducing costs and staying competitive.
5. Marketing automation
The rise of cheap marketing technologies and social media have made it easier for insurance firms of any size to promote themselves and compete with the market leaders.
65% of traditional European insurers plan to professionalise their online marketing (e.g. purchase of keywords) and 45% aim to improve their social media presence according to McKinsey’s research.
This tool is far more than just a Bitcoin technology, it’s said to be a technology that will make far-reaching changes to the worldwide economy over the next decade.
‘Blockchain technologies can help the wholesale insurance sector fulfil its role in underpinning the global economy more effectively,’
– according to PwC. Suggesting that the technology could reduce costs, errors and employee time wasted for savvy insurance firms.
Change or be changed
But how many businesses are actually adopting these technologies?
‘Compared to sectors like retail, the insurance industry is still early in its digital transformation’
– according to McKinsey’s report.
But, ‘within the insurance sector, top-quartile DQ [digital quotient] performers are generating a CAGR [compound annual growth rate] of 6 percent compared to 3.9 percent for the average player and substantially higher profitability’ according to the same report.
The leaders of the insurance world are making progress, but much of the industry has yet to catch up.
Why insurance companies need to improve
Many established insurance firms don’t see any reason to overhaul the technology they’re using.
The problem with that is that the insurance landscape is in a period of dramatic change. Standing still means falling behind.
Price comparison sites have boomed over the last decade, opening up the insurance world for the consumer. Customers are no longer loyal to particular providers. They visit price comparison sites and choose the provider with the lowest price and the best online reviews.
Many insurance businesses are already facing challenges keeping up with changes in customer behaviour. For instance, in the life insurance industry –
‘Real growth between 2005 and 2015 has been negative. Sales of new policies have fallen from 17 million per year in the 1980s to around 10 million today’.
According to McKinsey’s 2016 report.
And those challenges are only set to get worse new entrants gobble up market share. Across the whole financial industry, a wave of hungry tech start-ups is threatening to eat the incumbents’ lunches. The insurance sector is no different. Your insurance firm could come under threat from:
- Competition. Some InsurTech players, such as P2P insurance start-up Lemonade, seek to directly challenge incumbent insurance firms by offering a radical new offering to customers.
- Fragmentation. Most InsurTech start-ups won’t threaten insurance firms as a whole, but they do threaten sectors of their business.
Survival of the fittest within insurance companies
The future of your firm depends on how you improve the customer experience and weather competitive storms. As McKinsey’s report says:
‘Companies that offer best-in-class customer experiences grow faster and more profitably. To reach this level, insurers must relentlessly improve customer journeys across channels and business functions.’
Ultimately, every innovation that insurance leaders and InsurTech startups make trickles down to create a better experience for their customers.
‘68% of insurers say they have taken concrete steps to address the rise of FinTech in insurance,’ according to PwC’s report. For the other 32 percent, and the rest of the insurance industry, the mission is simple: evolve or die.
Let us know which digital transformation opportunity is most advantageous to insurance companies. Should you wish to learn more, download this guide on revolutionising the insurance industry ⇓