September 28, 2016
Not Your Father’s Insurance Industry
New ecosystems provide tremendous opportunities to transform risk management, the customer experience and operations.
If there were any doubts that the insurance industry is innovating and transforming, all doubts were dispelled at the 2016 SMA Summit. Insurer after insurer described innovative new business models, products and uses of emerging technologies. Virtual reality, drones, gamification, wearables, the IoT and other emerging technologies were all discussed – not as future possibilities for insurance, but as real-life examples in the marketplace. Partnerships with grocery chains, universities, nutritionists and insurtech companies, among others were prominent in the discussions.
See also: Customers’ Digital Expectations
One word in particular – ecosystems – was repeated throughout the course of the event. What is most fascinating about this is how the insurance ecosystem is now evolving. In 2009, SMA began a series of research that we termed the Insurance Ecosystem, which aimed to provide insights into the progress and plans of insurers, reinsurers, distribution channel players, claims partners and solution providers. At that time, most of the industry considered those types of firms, along with the regulators and customers, to be the entities that made up the insurance industry ecosystem. While all of these are still central to the ecosystem, in the new digital era new players are joining in, the boundaries between industries are blurring and new ecosystems are becoming important to insurance.
The connected world is not just about connecting things to the Internet and making them smart. It is about making new connections with companies in different industries to provide new products and services to customers, rethink the customer experience, attack operational processes in new ways and even address pressing societal problems. In the process, new ecosystems are forming. Ecosystems for smart homes, cities, vehicles, buildings and agriculture all are emerging with new players partnering in new ways. The healthcare, fitness, elder care and individual well-being areas are populated by many new companies alongside existing companies in traditional industries.
The companies in these new ecosystems may provide connected devices at the digital edge, data/analytics to manage information and create actionable insights, services built around the devices/data, tech infrastructure to support the ecosystem – or any combination of the above. These new ecosystems provide tremendous opportunities to transform risk management, the customer experience and operations, providing a new level of value to customers and society at large. The stories from the companies at the SMA Summit provide a great glimpse into the possibilities and throw down the gauntlet for other insurers.
See also: Waves of Change in Digital Expectations
The important question for insurers is how they will participate in these new ecosystems. It will not happen by magic. Insurers must actively partner, invest and innovate with companies outside the traditional industry. It won’t be too long before we will be saying, “It’s not your father’s insurance industry.” Success in the new insurance industry will be highly dependent on being an active participant in these new, emerging ecosystems.