May 6, 2015
Stretching the Bounds of Digital Insurance
by John Cusano
Digital insurance can build on the capabilities of the Internet of Me, the Outcome Economy and much more.
Last year, we began to see industry leaders respond positively to disruption and start to reimagine their businesses for the digital insurance era. We predicted that insurance’s “Digital Transformers,” many with deep resources, huge scale and process discipline, were about to rewrite much of the digital playbook. They would use technology not just to improve their internal processes but also to create and exploit entirely new opportunities for growth.
This year, our Technology Vision shows how these pioneering insurers are fundamentally changing the way they look at themselves; leading carriers are quickly mastering the shift from “me” to “we.” They are stretching the boundaries of digital insurance by tapping into a broad array of other digital businesses, digital customers and digital devices at the edge of their networks. In the process, these forward-thinking companies are not just transforming insurance but are looking to reshape entire markets and change the way we work and live.
Every year, Accenture’s Technology Labs collaborates with Accenture Research and a large number of business and technology specialists to pinpoint the emerging technology developments that will have the greatest business impact on insurers in the next three to five years.
This year’s Accenture Technology Vision highlights five themes that will catalyze the growth and transformation of the insurance industry’s digital power brokers of tomorrow.
1. The Internet of Me is changing the way people around the world interact through technology, placing the end user at the center of every digital experience.
2. Digital devices at the edge, where the digital and physical worlds meet, are powering an Outcome Economy and enabling a new business model that shifts the focus from selling things to selling outcomes.
3. The Platform (R)evolution reflects how digital platforms are becoming the tools of choice for building next-generation products and services—and entire ecosystems in the digital and physical worlds.
4. The Intelligent Enterprise is making its machines smarter—embedding software intelligence into every aspect of its business to drive new levels of operational efficiency, evolution and innovation.
5. Workforce Reimagined sees advances in more natural human interfaces, wearable devices and smart machines extending intelligent technology to interact as a “team member” and working alongside employees.
The emergence of the new “We Economy” is sure to bring profound change to the insurance industry. The transition has already started, led by those carriers that welcome disruption as an opportunity to outpace their less agile competitors and to discover new paths to growth.
Shaping a positive response to such far-reaching change is not a trivial issue. Insurers face extensive transformation as they seek to redefine their role in the face of rapid advancements in big data, robotics, nanotechnology, genetic engineering, artificial intelligence and many other technologies that promise to change our world dramatically in the next decade.
75% of insurers believe that, in the future, industry boundaries will dramatically blur as platforms reshape industries into ecosystems. But most insurers are still tied to a business model based on pooling risk, calculating average pricing and generating gross premium income. This model will come under increased threat in the future as the Internet of Things, big data, digital channels and artificial intelligence enable carriers to assess and price risk directly and individually.
The leaders are already thinking about what their role will be in an economy where service is personalized and real-time, measured by outcome and delivered through powerful digital ecosystems. They are preparing to use their digital advantage to stretch their businesses beyond the boundaries of the enterprise—and of traditional insurance. 35% of insurers are comprehensively investing in digital technologies as part of their overall business strategy; 29% are investing in selected business units.
For brave insurers, digital technologies and new sources of rich data also bring new possibilities for underwriting, opportunities to take out significant costs though machine learning and other automation strategies and powerful ways to differentiate by finding new sources of customer value and enhancing the customer experience.
The Digital Transformers are thus taking a two-speed approach to exploiting new technologies.
They’re addressing their short-term needs by improving specific processes and products, while at the same time investing in their future by exploring the transformative potential of digital. They tend not to have a digital strategy as such, but a business strategy that is altogether digital. Their digital investments are directed less at specific processes or operations than across the enterprise value chain.
These pioneers have realized that digital technology is not just about driving market differentiation, stronger customer relationships and better quarterly returns. It is also about collaborating with other organizations to effect long-term change and shape business outcomes in ways that were not possible before. And it is about insurers revisiting their core purpose within society and what that means in the digital world.
The objective of insurance has always been to manage the risks inherent in growth, progress and innovation, and that is a purpose that is more relevant than ever in a world of accelerated change. When automobiles upended the ways that societies and economies worked in the 20th century, insurance helped smooth the risks and make the horseless carriage a safe reality. Now, with the first driverless vehicle poised to become a commercial reality, insurers once again have the opportunity to be the enablers of a disruptive technology that will change the way we live.
Here, as before, it is insurers who should mediate the changes and mitigate the risks. There is no innovation without regulation, and no industry better placed than insurance to take on the responsibility of governing the dangers of disruptive new technologies.
Everything is connected
Consider the rapid growth of the Internet of Things. It is potentially bringing every insurable asset, life and activity into the digital realm, creating a new world of possibilities for insurance. Forward-thinking insurers are using these connections to offer new services, reshape customer experiences and enter new markets by creating digital ecosystems.
In the emerging vision for the connected home, the entire home will soon become a single connected entity, both internally and with an ecosystem of service providers, each of which monitors and reacts to data that’s relevant to itself. This includes the security team, emergency services, and of course, the insurer.
Home owners will receive a variety of data, from energy consumption levels to alerts and even surveillance video feeds, on their mobile devices or any other channel they prefer. In this ecosystem, how can the insurer go beyond offering cover to help customers manage risks and prevent accidents that would lead to a claim? And how can it mitigate the risks of this technology breaking down or malfunctioning?
BNP Paribas Cardif in Italy already offers Habit@t, an insurance package that uses technology to secure customers’ homes. Habit@t employs sensors to monitor the home, even when no one is in. In case of danger—fire, smoke, flooding, lack of electricity—it alerts the customer and the operations center.
According to BNP Paribas Cardif: “These types of offers will typify your future relationship with your insurance providers: they are no longer there simply to assist you after an incident. They now help you anticipate incidents and limit their consequences, while improving your comfort and security on a daily basis.”
In healthcare, Apple and Humana in the U.S. have partnered to let consumers share Apple HealthKit data with the Humana Vitality app. HealthKit brings together wellness data from wearable devices and apps, letting consumers track and share their daily steps walked, calories burned, heart rate readings and other data.
In exchange for their data relating to healthy behavior, customers receive financial incentives such as discounts on their monthly healthcare premiums. Here, the insurer’s role isn’t simply to provide health insurance but also to help customers lead healthier lives. What does it mean for society when the focus is on monitoring patients to keep them healthy rather than on treating them when they’re ill?
And in the auto insurance sector, the connected car is bringing disruption and opportunity. Many insurers already use car telematics to personalize risk assessment and pricing, or even to offer usage-based products. Some are using it to offer a range of services like roadside assistance and traffic alerts, vehicle security, driver coaching and so on.
Looking a little further into the future, driverless cars have the potential to turn the auto insurance industry on its head. Again, leading insurers are starting to forge new partnerships and build ecosystems that will allow them to remain relevant in a world where personal auto ownership will be rarer and where the nature of the risks they manage will be vastly different.
BMW and Allianz have agreed to offer usage- based insurance underwritten by Allianz for the car manufacturer’s i3 and i8 electric vehicles in the UK. And State Farm, the U.S.’s largest personal lines auto insurer, is collaborating with Ford on autonomous driving research. Together, the companies are assessing whether driver-assist technologies can lower the rate of rear collisions.
And in many segments of the market, the need for traditional insurance coverage is slowly evaporating. In auto insurance, for example, the imminent arrival of autonomous vehicles together with a trend away from owning cars might shrink the size of the addressable market. Similarly, a combination of hardier, high-yield crop varieties and big data for more accurate forecasting of crop yields is starting to erode the market for crop insurance. Insurers must think about new business models and revenue streams to compensate for those that slow down to a trickle or even disappear in the years to come.
Tomorrow’s digital insurance leaders
As the earlier examples illustrate, forward- thinking insurers see great potential to make a difference—and to make a profit—by operating within ecosystems, not just as individual corporate entities. Working in concert with players from other industries, leading insurers are considering how to tackle significant challenges that societies, organizations and people will face in the future. Whether under their own brands or as partners for other companies, they will play a role in transforming centuries-old modes of transportation; raising the quality of healthcare by tackling it holistically, across many industries from hospitals to insurance and robotics; and much more besides.
Insurers have an opportunity to embed themselves in tomorrow’s customer-centric digital ecosystems, become the regulators of the disruptive technologies of the future and help to enable progress. This is an opportunity they should not squander.
Read the full report at Accenture