BigTech firms take measured steps toward the insurance sector
As they build advanced capabilities in connected homes and cars, IoT, and healthcare, it may be safe to assume that BigTech firms are also eyeing the insurance industry, considering their latest initiatives.
Leveraging the vast amount of consumer knowledge and advanced technological capabilities they possess, Amazon, Alphabet, and Apple are exploring multiple opportunities in insurance and related industries. For example, Amazon Protect was introduced in the UK to offer coverage for a variety of products sold on its e-commerce site. Moreover, Apple has entered into a partnership with Cisco, Aon, and Allianz to develop a cyber risk-management solution.
These steps have given rise to speculation about BigTechs becoming potential insurance competitors and equally enthusiastic skepticism regarding whether they can or will want to fully enter a capital-intensive industry with relatively low returns. However, it is imperative to understand that if BigTechs do consider entering insurance with a disruptive model, they have certain strong, unique advantages over existing players.
BigTech firms leverage big data
A key advantage BigTech firms have over existing insurance players is easy access to a wide range of personal and behavioral customer data. Based on this data, they have built ecosystems that personalize services and enable customers to experience new, value-added services. Such ecosystems also help BigTech firms lock customers in for new services.
By serving customers in diverse ways, BigTech firms are revolutionizing the way business is handled. Unrestricted by legacy and outdated techniques, they are agile and can respond quickly to changes in markets and customer expectations. Cloud-based systems form the backbone that supports the high-scale operations of these tech giants while keeping customer-centricity and operational efficiencies at the core of their businesses.
BigTechs have a first-mover advantage
BigTech firms are at the forefront of innovative capabilities, such as data analytics, artificial intelligence, and machine learning. The result? First-mover advantage when it comes to leveraging myriad disruptive applications that can potentially turn traditional insurance industry business models upside down. For incumbents who rely on traditional methods of customer acquisition and servicing, tech-based business models can pose immense challenges.
Today’s customers expect digital
Digital experiences are now an accepted and expected part of customers’ daily lives, and through their digital expertise, BigTech firms are continuously raising the customer-satisfaction bar. In fact, they are shaping customer demands and setting the benchmark across all consumer-facing industries. It is no surprise that an increasing number of customers have gradually started to show a willingness to purchase insurance products from BigTech firms.
Since 2015, the number of customers willing to purchase an insurance product or service offering from technology firms has been increasing, barring regional variations. According to the World Insurance Report (WIR) 2018, globally 29.5% of customers say they are considering buying at least one insurance product from BigTech firms, if they start offering.
A relatively low bar in customer experience may be the reason why 49.4% of Latin American and 40.1% of APAC (excluding Japan) customers say that they are open to purchasing BigTech insurance offerings. However, in North America, where insurance customers reported the highest positive experiences globally, the percentage of customers considering Big Tech firms almost doubled, from 16.4% to 32.6%, between 2015–2018.
Convenience trumps privacy
Customers are willing to give BigTech firms a chance to serve their needs when it comes to insurance products. This is despite concerns over privacy/security and the lack of trust that dominate consumers’ top apprehensions about these tech firms.
Millennials, in particular, are increasingly open to trusting BigTech firms in return for personalized and streamlined services. A WIR 2018 survey revealed that 32.4% of tech-savvy and 25.4% of Gen Y customers were, indeed, willing to share personal data with BigTech firms.
Prompted by their positive experiences in other industries, such as retail, young and tech-savvy customers may switch loyalties if BigTech firms enter the insurance industry. Therefore, potential competition from BigTech firms could be aggressive if they decide to enter the battle to capture the mindshare of the evolving insurance customer base.
Based on their current initiatives in the insurance and healthcare space, BigTechs have the potential to significantly impact the insurance industry and alter the competitive landscape. The future landscape of the insurance industry is, thus, profoundly dependent on how BigTechs plan to mark their presence in the insurance value chain. One thing, however, is certain – BigTechs will alter the insurance customer expectations and innovation landscape for the insurance sector.
Incumbents must adopt digital capabilities
To be prepared for this potentially upcoming competition, insurers must quickly embrace digital capabilities to attain operational agility, deliver better customer experience, and thrive in the long term. The opportunities for insurers to engage more frequently and meaningfully with customers is wide open, and developing personalized, memorable, digitally-enabled products and services could positively affect customer experiences.
To provide well-orchestrated, convenient experiences for customers, insurers must start thinking, today, about future readiness – a state in which they can deftly respond to market shifts and changes in customer expectations. The business longevity path forward depends on insurers’ strategic and agile responsiveness.
Incumbents must act quickly and decisively to adopt technologies that ensure customer satisfaction as well as long-term business survival in today’s competitive market.
To further discuss this change in the industry dynamics, feel free to reach out to me on social media.
 CB Insights, “Google’s Investments And Partnerships In Insurance Tech,” December 7, 2016, https://www.cbinsights.com/research/google-insurance-tech-investments, accessed May 2018
 CB Insights, “A Look at Amazon Protect: Amazon’s Warranty Insurance Brand Expands In Europe,” September 21, 2017, https://www.cbinsights.com/research/amazon-protect-product-insurance, accessed May 2018.
 Business Insurance, “Cisco, Apple, Aon, Allianz collaborate on cyber coverage,” Matthew Lerner, February 5, 2018, http://www.businessinsurance.com/article/20180205/NEWS06/912318975/Cisco,-Apple,-Aon,-Allianz-collaborate-on-cybercoverage, accessed May 2018.
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