The political and economic environment here in the UK and many other parts of the world is undoubtedly turbulent but to my greatest relief, I heard the insurance industry leadership saying more than once that “disruption is not a bad thing, it is in fact, an opportunity” at the ABI Annual conference 2016. This is especially surprising coming from an industry that many have perceived as late adopters of new technologies or innovation.
The impression I got is that the industry is in total acknowledgement of what is happening be it the post-Brexit social, economic & political situation, or the US election results. They also acknowledge the changing dynamics of customer expectations in the digital era, the proliferation of new competitive digital players, the ever challenging regulatory landscape (including the General Data Protection Regulation), the grave danger of cyber risks, and even the threat of autonomous vehicles or wearable technologies. The good news is that these are viewed as disruptions to capitalise on even as they challenge current business models.
With respect to Brexit, the industry’s concerns seem to go beyond passporting rights. Insurers believe that the ability for skilled workers to move around is a big issue. Although a solid plan from the government is yet to evolve, the industry believes that they will be in a position to convince government provided they have enough facts and figures to push their case forward. I heard ‘Big Data’ being referenced to multiple times in this context!
Acknowledgement and acceptance are clearly good first steps. On top of that, if the carriers – especially some of the large incumbents – try to drop the complacency and shortsightedness which are sometimes blockers to evolve as innovative and agile organisations, they will definitely be much better placed to respond to the turbulence. Many insurers seem to be progressing in that direction. At least the initiatives from some of the players, discussed during panel and breakout sessions, convince me of that. AXA Group talked about their investments in R&D foresight initiatives and their partnership with Trov to offer On Demand insurance. AIG spoke about their award winning Smooth Driving Initiative (SDI) for harnessing telematics to keep the drivers safer. Lloyd’s of London spoke about their electronic placement (Placing Platform Limited) of business despite the numerous challenges with respect to legacy systems, number of organisations involved, processes and practices. More examples of innovation in the industry can be found in the IDC report published earlier in the year Challenges and Trends in the Insurance Industry, 2016.
There was a general consensus that the following are key for insurers to stay relevant amidst all the chaos globally and locally and also the technological disruptions:
- Effective leadership – A leadership that can nurture agile, innovative organisations.
- Customer centricity & omni-channel engagement – Products and services that are simple and personalised to suit individual customer requirements and delivered through their channel of choice. Customer segmentation is key to achieve this.
- Product innovation – Exploring opportunities in threats. For example, autonomous vehicles may challenge traditional insurance products but they bring in the inherent threat of cyber breaches. This opens up a great opportunity to offer cyber insurance coverage. Same with niche products for shared economies.
- Ecosystem view – Collaboration with all relevant internal and external stakeholders be it InsurTechs, regulators, car manufacturers, employees, distributors, technology suppliers and even other insurers. Insurers need to remember that doing it all on their own is not efficient. Specifically, with respect to InsurTechs, insurers at the conference acknowledged that partnerships with them are no longer optional extras, but the need of the hour.
- Data Focus – Data becomes key not only to target the right customer segments but is also critical to compliance. Data transparency becomes key in considering the regulatory challenges ahead.
- Talent – Upskilling the experienced and knowledgeable workforce is equally as important as recruiting talent with new digital skills.
These points were particularly exciting for me to listen to because all our research around transformation in insurance organizations (IDC MaturityScape: Digital Transformation in Insurance 1.0, IDC MaturityScape: Omni-Experience Digital Transformation in Insurance 1.0) point out that insurers should address five different dimensions: Leadership, Operating Model, Omni-Experience, Information and Work source to transform their organizations to adapt to ever changing market situations.
As one of the panellists rightly mentioned, there will be turbulence, and there will be chaos, but the industry has to continue to be an enabling force for its customers at their most challenging financial situations. As long as it sticks to that fundamental principle, and collaborates with the wider ecosystem to meet customers’ changing needs and demands, it will be able to weather the disruptions and prevail.
To get more insights about worldwide insurance strategies, please contact Sabitha Majukumar.