What insurers must do to outperform competition
Traditional problems have plagued the industry for decades. Earnings sensitivity due to external factors and opaque risks that investors are challenged to underwrite will remain. Additionally, changes in the industry structure have created noteworthy competitive pressure on the carriers. Insurers are still struggling to modernize operations and technology as investments rarely fail to reduce expenses.
Leading Insurers see opportunities towards value creation
These new market dynamics and trends may be daunting, but insurance leaders can also see opportunities to pave new ways towards value creation. Insurers must carefully study each part of their insurance value chain and define where they can and cannot reasonably have competitive advantage within their vertical of business.
Insurers who unbundle their business will outperform in the coming decade
Leading insurance carriers who undertake the method of unbundling their business— will likely outperform in the decade ahead. This transition will not be made easily, but failing to act now will result in forthcoming challenges. Insurers must first gain an understanding of market dynamics and trends in order to conclude which parts of the value chain they are best positioned to win, and in which areas they need to stop internal operational developments.
Future industry development will require leading capabilities across customer insight–led product design, user experience, risk assessment, pricing, and claims management. In some parts of the business, insurers are likely to leverage on their own capabilities and in some realize they need to partner up with insurtechs to fully harness opportunities in each part of the insurance value chain to the fullest.
Complex legacy-technology systems and platforms are the biggest bugbear for many insurers.
They create complexity, increase costs, and hinder insurers’ ability to launch products and manage existing portfolios and customer touchpoints. Increasing number of insurers address their legacy problems by outsourcing to technology providers and partners. However, the insurers must keep in mind the expectations and fit when partnering to provide solutions and offerings in line with the company’s strategic vision.
The choice for insurance carriers to address operations and technology is not straightforward. Operations are core to the touchpoints along with the insurance customer journey, and insurers want to continue to own their client relationships. Companies that want to maintain such ownership and make it a source of competitive differentiation will need to ensure that their technology investments are accretive and agile to further developments.
Insurers on their own will have difficulties that require significant bandwidth to undertake all parts of their value chain —taking focus away from their core business (serving their customers). This will create a push for the next generation of technology service providers to offer more modern, customer-centric, integrated, end-to-end solutions to serve a maximized insurance experience.
Insurers will need to develop new set of capabilities, including:
- A modern digital mindset with cloud-first approaches to manage applications and data from a policyholder standpoint.
- Data, data, data and analytics to tackle complex issues across data extraction, premium calculations, reserving, insights and operational tasks.
- The ability to attract and retain a different type of technology talent, including engineers, developers, and data scientists that can set requirements from technology partners.
- A software culture and more agile ways of working through closer collaborations between the core business and external technology providers insurtechs.
What insurers can do to get started
To get started, insurers must first reassess each of their businesses and identify in which parts of the value chain they are most distinctive. Then, they must reimagine how they can maximize value from that, while leveraging distinctive capabilities from others. Finally, insurers must re-engage with all of their stakeholders— employees, customers, partners and investors—to bring them along on their transformational journey. Insurers that do not mix their own strong capabilities with the knowledge and expertise from others will find it increasingly challenging not only to compete but to survive.
A whole new level of claims
The future of insurance will be digital – and we’re here to help you future-proof your business.