We all know insurtech is transforming the insurance industry, but roughly how much money is at stake? Quite a bit, according to Accenture, who have just completed a study of seven major insurance markets, including the UK.
Insurance carriers globally could seize US$375 billion in new revenue in the next five years by transforming and revitalising their businesses. The report, “Insurance as a Living Business,” finds that insurers that continuously innovate and adapt to changing customer needs will be able to capture emerging growth opportunities and outperform competitors.
The report estimates that these insurers could, in aggregate, generate an additional US$177 billion in revenue from five key areas: emerging risks like cyber security and autonomous vehicles; improved penetration of markets that until now have been difficult to profit from; value-added services that help reduce customers’ risk, such as connected devices in homes to detect maintenance issues before they cause damage; expanded business partnerships, both within and outside of insurance, to create more-personalised offerings for consumers.
Insurance Edge has recently featured many companies already actively disrupting traditional marketing methods, such as Homelyfe, Cuvva, Insure Telematics Solutions, Flock Drone insurance specialist, Guidewire and many more.
Another US$198 billion in new revenue represents the potential shift in market share within the five key areas, favouring insurers who embrace transformation at the cost of less-responsive competitors.
“The insurance industry as we know it is at the edge of a new business environment,” said Michael Costonis, who leads Accenture’s Insurance practice globally. “Breaking away from the pack and capturing new revenue opportunities requires a shift in business mindset – a shift from product-focused to customer-focused; from rigid operating models to more fluid and agile operating models that respond quickly to customer preferences; and from going to market alone to partnering with insurtechs and technology behemoths that can help them reach new customer segments and reinforce their brand.”
The report recommends several steps that insurers can take to amplify growth opportunities. These include developing an enterprise-wide digital strategy that embraces new models and new technology – including artificial intelligence, blockchain, smart contracts and the internet of things – to offer more-personalized and faster services, and harnessing the treasure trove of customer data already in their possession to better customize their offerings.
In addition, the report identifies five areas for revenue growth where insurance carriers – across property and casualty, life and commercial lines – could either launch new products and services or increase the reach of those they already sell.
1. Targeting hard-to-reach market segments in new, more effective ways. As new channels (online, mobile) and technologies (analytics, geo-location) proliferate, insurers can tap into harder-to-reach segments, like micro insurance or instant issue for life insurance, to grow market share cost-effectively. The could generate US$144 billion in new revenue.
2. Opportunities from new risks. Insurers should develop new offerings that address emerging risks, such as cyber insurance and new commercial exposure brought about by the advent of autonomous vehicles. This could generate US$111 billion in new revenue.
3. Non-traditional intermediary roles and ecosystems. Business relationships with insurtech startups and organizations outside the insurance industry can enable insurers to engage differently with customers and discover new sources of customer value. This includes plugging into existing ecosystems operated by online platform companies such as Google, Amazon, Facebook and Apple to connect with consumers who are already taking advantage of their platforms, including virtual assistants. This approach could generate US$80 billion in new revenue. According to the report, three-quarters (76 percent) of the new revenues in property and casualty lines are likely to come from these non-traditional relationships.
Insurance Edge Comment; This is perhaps where the UK will see the greatest level of change. Some traditional call centre insurance brokers/intermediaries are really going to struggle to adapt to PAYG, flexible multi-purpose, multi-person insurance, bought via app, with customer claims info and complaints sent via social media. It is a profound shift in power, in choice, from the brokerage network to the customer.
4. Monetisation of data platforms and models. Insurers can offer their assets – data, customer insights, platforms and models as services, risk algorithms, etc. – to ecosystem partners who would benefit from them. Doing so could generate US$28 billion in new revenue.
5. Value-added services. Insurers should focus on personalized services that help reduce customers’ risks, such as the use of wearables to help aging relatives stay at home longer, and selling and managing connected home devices. This could generate US$12 billion in new revenue.
“Maintaining the business status quo is unsustainable,” Costonis said. “Insurers’ profits and revenues are under pressure as insurtech startups proliferate and technology companies with strong personalized customer relationships circle the industry. Innovation – beyond aggregators and online distributors – must be an industry priority. Carriers that make the right business changes, understand their customers, and respond to them rapidly and fearlessly with relevant, innovative offerings will be more likely to increase market share and capitalize on the new emerging opportunities.”