Four Themes Will Shape The Future Of Insurance
The future of insurance is here. Insurers can no longer wait on the sidelines. They must get in the game. What game you ask? The game of who will win the hearts and wallets of tomorrow’s insurance customer. Your competitors (think Amazon, Lemonade, and Tesla) give consumers frictionless buying experiences. For insurers to keep pace, they must use technology to increase digital maturity across the customer journey and value chain. But technology alone won’t drive sustainable competitive advantages. Partnerships, people, products and processes will factor heavily into four themes that will shape the future of insurance. For more on those themes, keep reading.
Insurance Companies Will Focus On Solutions, Not Products, To Stay Relevant
Your customers’ lives are complex and so too are their risk hedging needs. It’s all about loss protection, and your customers’ loss protection needs are as unique as their personalities. Insurers must deploy technology to leverage data and analytics to know their customers better. If you can’t build these capabilities internally, technology vendors offer solutions that will allow you to shift from a siloed operating framework to a customer-centric one. This shift will provide the comprehensive insights needed to get customers the right coverage at the right limits. But don’t forget that your agency partners will also be critical across the customer lifecycle. So, you must invest in agency technology that elevates agency experience, too.
Insurers Will Offer Dynamically Priced Products To Drive Business Efficiency
Connected insurance is coming. According to Forrester survey data, consumers are increasingly interested in sharing data for discounts. Although we’re still in the early days, sensor-based insurance will transform how you service and engage with your customers. Though adoption is only about 6% in auto (the most “mature” market), these products personalize coverage and help you manage risk. It’s a win-win for both insurers and customers, particularly those customers who are hyper-focused on managing their finances. Connected insurance, in the form of pay-per-use insurance, can help them do just that.
Insurance Companies Will Form New Partnerships To Create Value And Drive Growth
With many insurance markets constrained by waning demand, insurers are looking for growth in new markets. I expect new distribution arrangements to increase as both insurers and their ecosystem partners remove friction from their customers’ buying journeys. Think about Ford’s and Tesla’s moves into auto insurance and Amazon’s move to sell small business insurance. The industry giants already have customer relationships that they can leverage to help insurers extend their reach into new channels.
Insurers Will Create New Business Models And Explore New Revenue Opportunities
As insurers position for growth, partnerships can help you extend your products and services into new markets. But revenue growth can also come from monetization of your core capabilities. In the future, insurers will explore ways to diversify their businesses and capitalize on what they do best. You must first determine what your core competencies are and if there is a need for them. Insurance technology (insurtech) vendors extend their products and services through APIs. Why can’t you? The insurance value chain is decoupling, and vertical integration is breaking apart. To participate, you must plan how you will integrate into and not isolate your core competencies from an expanded ecosystem of service providers (i.e., lead generators, comparison marketplaces, agency advisors, claims processors, and engagement platforms). You must deploy technology to scale these competencies and create value for your customers, prospects, intermediaries, and investors alike.
The future of insurance is exciting, given the new energy coming into the sector from emerging technology and its enabling capabilities. Insurtechs and ecosystem orchestrators see the opportunity and exploit consumer demand for digital experiences. Insurers that can invest in innovation across the value chain and customer lifecycle will benefit from improved customer experience, which, in turn, will drive revenue and profit. But knowing where to invest first can be a headache. That’s why the right partnerships matter.
To understand the business and technology trends critical to 2021, download Forrester’s complimentary 2021 Predictions Guide here.
This post was written by Senior Analyst Jeffery Williams, and it originally appeared here.
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