Insurance: Disruption impact scale


Insurance: Disruption impact scale

graFINLAB3

Insurers: Key questions for consideration

How will insurers create customer loyalty and stickiness going forward as insurance products become  increasingly commoditized and new, digital entrants disaggregate customer relationships?

How can insurers convince customers to opt-in for behavior and physical asset monitoring, particularly if  offering lower rates is not a viable strategy?

Will insurance distribution modernization and artificial intelligence (AI) make agents and brokers obsolete?

What challenges will arise related to the aggregation and ownership of new behavioral data from sensors?

Industry dynamics

Increasing connectivity will lower  entry barriers

Magnitude: 5

Timing: 3

Advances in technology are allowing  nontraditional players to enter the industry.

ZhongAn, China’s first  online-only general insurer, was launched by Alibaba (the  largest online retailer in China)  and Tencent (a provider of  value-added internet and online  gaming services in China).

Internet of Things (IoT)-based data flows are  already leveling the playing field.

Many sensing capabilities  do not require large data sets to participate,  enabling small, mid-sized  players, or even new  entrants to seize business  from large players.

Smaller players could  pool telematics data  to compete with larger  national carriers

Call to action

Identify potential emergence of technology platforms that  lower transaction costs and align with fintechs to get ahead  of new competitive threats.

Join fintechs that provide telematics and sensor data via a shared platform to improve risk selection without  committing to large investments in proprietary technology  infrastructure.

Distribution

Technology-enhanced inter-  faces will compel insurance  distribution modernization

Magnitude: 4

Timing: 4

Web-based aggregators and social brokers  are set to challenge the dominance of agency  distribution, but the timing of this trend will  likely vary among geographies.

French company Fluo assesses various policies from  different providers to help consumers make better  decisions

Peer-to-peer insurance platforms will reinvent  insurance.

Lemonade aims to pool like-minded insurance clients  together through their social networks.

AI-driven automated agents generate potential  for “higher efficiency” interaction. As the  technology advances, use will become more prevalent.

Insurify, an MIT-backed  startup, launched Evia (Expert  Virtual Insurance Agent),  which uses AI to find better  car insurance, minimizing  agent intervention

Call to action

Assess the impact of aggregators/P2P platforms on  products and business margins and implement strategies to differentiate and compete transparently and aggressively.

Enhance the quality of customer interactions through the  use of AI technologies, which take into account consumer  preferences and emotions to personalize communication,  in sales and support.

Business economics

Traditional revenue  sources will shrink due  to changing demand patterns, but new markets  may emerge over time.

Magnitude: 4

Timing: 3

Shrinking risk pools in traditional business  lines could diminish revenue in the short-to-medium term.

The sharing economy, with fewer cars and less demand  for homes and office spaces, could reduce demand for insurers’ largest business lines—personal auto and  property and liability coverage—and may also force  pricing down, thereby cutting premium volume.

Early hazard detection sensors for personal and  commercial use may also decrease loss costs and  lead to price reduction.

Long-term opportunities for new business and  lower expenses abound

Greater connectivity  promotes a boost to  business lines like cyber  insurance and product  liability coverage.  Technology decreases  human intervention,  promoting greater  efficiency and lower  costs.

Call to action

Create a sensing team charged with continuously scanning  technology disruptions, simulating their impact on the  business, and providing intelligence for strategic decision  making.

Enter alliances with fintech partners that have the expertise  and the operational infrastructure to exploit new markets or  develop new coverage lines.

Customer experience

Ubiquitous sensors will improve  customer experience through  more continuous engagement.

Magnitude: 3

Timing: 4

Web-based aggregators and social brokers  are set to challenge the dominance of agency  distribution, but the timing of this trend will  likely vary among geographies.

French company Fluo assesses various policies from  different providers to help consumers make better  decisions.

Peer-to-peer insurance platforms will reinvent  insurance

Lemonade aims to pool like-minded insurance clients  together through their social networks

AI-driven automated agents generate potential  for “higher efficiency” interaction. As the  technology advances, use will become more prevalent.

Insurify, an MIT-backed  startup, launched Evia (Expert  Virtual Insurance Agent),  which uses AI to find better  car insurance, minimizing  agent intervention.

Call to action

Assess the impact of aggregators/P2P platforms on  products and business margins and implement strategies

to differentiate and compete transparently and aggressively.

Enhance the quality of customer interactions through the  use of AI technologies, which take into account consumer  preferences and emotions to personalize communication,  in sales and support.

Offerings

Product innovation will  accelerate in an increasingly  connected/digitized economy.

Magnitude: 3

Timing:4

Already in play, IoT will progressively spur  real-time products and micro-segmentation.

Telematics-enabled personalized  and location-based products

and services are increasing the  number of insurer/client touch  points with a positive spin. Slice Labs Inc. is launching  platforms for on-demand  products that provide pay-per-use  insurance policies for drivers  providing car-sharing services.

Connectivity promotes opportunities for new  products, but may shift viability of lines of  business over the next several years.

Books of business will shift from  personal to product liability, as  claims evolve from human error to  product failure (e.g. driverless cars,  smart home sensors).

Call to action

Create in-house labs to help build next-gen product  development technology platforms. Focus on “smarter  products” that leverage technology such as sensors  and blockchain to deliver services faster at lower costs.

Incumbents should also shift gears to provide coverage  for “digital lives” such as hacking incidents, identity theft,  cyber attacks, etc.

Operations

Speed and precise risk-  selection are the new normal.

Magnitude: 3

Timing: 3

Policy servicing and claims processing become  real-time.

Claim Di is a mobile app  launched in Thailand  used to facilitate faster  claims-communication  between drivers and  their insurers and shift  the burden of the claims  process from customers  to insurers

Big data-driven analytics will make risk selection  and loss control more effective as insurers’ data  management capabilities accelerate.

A variety of data gathered  through connected devices  and social media platforms  is making risk selection  more granular, helping  insurers manage overall  risk with more precision and personalization

Call to action

Ally with fintechs to focus on high-growth solutions such as  digital IDs and smart contracts to improve speed and ease  client burden on insurance transactions.

Create technology infrastructure for seamless data  collection, monitoring, streaming, and analytics across  functions using cloud-based shared platforms.