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A Great Year for Digital Resolutions

When it comes to thinking about 2018, you may have already set some company goals and feel that your plans are in place. Implementing plans, however, can be difficult, and every plan has a tendency to change over the days and months that it grows into a reality. New Year’s resolutions may not be the answer to all of your future issues, but they may help you to maintain focus on important end goals.

If you want to see your organization adapt to new market drivers, remain competitive and relevant, and position for growth in the Digital Insurance 2.0 world, consider these six areas as New Year’s Digital Resolutions.

We Will Focus Forward

The most important high-level resolution an organization can make will be to focus on the future by rapidly moving from Insurance 1.0 to Digital Insurance 2.0. Your Insurance 1.0 business model will continue to be valuable for meeting the traditional needs of your current customers. But Digital Insurance 2.0 is rapidly emerging with new business models, products and processes that meet the needs and digital expectations of a new generation of insurance buyers. The digital future is exciting, compelling and important enough to begin aggressively preparing for a new future of insurance and cutting our mental ties to many of our sacred past assumptions and philosophies.

See also: 4 Ways That Digital Fuels Growth  

We Will Wake Up to Shifting Customer Behaviors

What caused some insurers to be slower on the digital uptake in 2016 and 2017 was a general lack of understanding of the shift in customer expectations, among both consumers and business owners. Many insurers didn’t think that growing customer trends would dramatically alter their own products and services — or that customers were going to play such a large role in pushing technology adoption. They didn’t foresee that customers’ digital utilization would affect all industries, rewriting the idea of competition and removing any sense of loyalty and security.

Now, that’s history. Technologies allow startups to compete using customer-centricity, as opposed to products, as their value offering.  And a new insurance paradigm is being crafted regardless of whether incumbent insurers choose, or are able, to play to compete in the era of Digital Insurance 2.0. For reference on just how deep these changes go, be sure to read Majesco’s research report, The New Insurance Customer – Digging Deeper: New Expectations, Innovations and Competition. Look for our research report on small-medium businesses later this month.

Every day in 2018 and beyond, we should attempt to be sensitive to the power of consumer opinion and behavior that will affect insurance. Our newfound sensitivity will allow us to become more innovative as we match our new technologies to consumer desires.

We Will Pursue Speed to Value

The best New Year’s resolutions are those where constant application will provide clear impact. When insurers link business drivers to cloud business platform capabilities, they can begin to prioritize their efforts based on speed to value and a logical progression toward digital expertise.

Realizing business value sooner with iterative rollouts is the essence of speed to value, a defining competitive element in the digital age. This includes speed to implementation, which provides the ability to get up and running in weeks or a few months versus years; speed to market, where you can rapidly develop and launch new products or enter new states with ready-to-use rules and tools; and speed to revenue, which rapidly enables business growth with minimal up-front cost. Speed to value is redefining a new generation of market leaders that leaves traditional, slow-to-respond business models increasingly at risk of irrelevance.

We Will Build to Flex

Homes and buildings in earthquake-prone communities are now built or retrofitted to withstand the unexpected tremors (and risk) that would crack traditional foundations. Insurance can take a lesson from earthquake-proofing. Our operations are similarly prone to other kinds of “earth-shaking trends” and risk that require the business to flex without breaking.

Digital preparations must consider the unknown future. In everything insurers do, they should be removing rigidity and replacing it with agility and flexibility. Emerging technologies and connected devices will be adding value to insurers’ abilities to protect customers and compete with startups. But these technologies will only yield benefits to insurers that can quickly and efficiently plug them into a “find and bind” architecture on a cloud business platform to beat out competitors with new service offerings. The same digital preparations apply to channel development. An omnichannel presence is a digital one, providing seamless customer experiences.

We Will Look for Greenfield Opportunities

Market opportunities are all around, emerging rapidly in a fast-changing world. The intense industry disruption from changing customer expectations, advancing technology and shifting market boundaries creates risks and opportunities that many startups and greenfields are taking advantage of. Likewise, a growing number of existing insurers are incubating new ideas and products to spur innovation and gain market insights and advantages. These opportunities are within growing segments that are underserved or unserved for both P&C (personal and commercial) and L&A (individual and group/worksite) market segments. For a deeper view on these opportunities, read A New Age of Insurance: Growth Opportunities for Commercial and Specialty Insurance in a Time of Market Disruption and the coming A New Age of Insurance:  Growth Opportunity for Employee and Voluntary Benefits Insurance in a Time of Market Disruption reports.

See also: What’s Your Game Plan for Insurtech?  

Traditional insurers are finding that the best way to compete with startups is to be one — forming greenfield businesses that launch outside of current systems and processes for rapid product development and market testing. Life insurers, for example, are ripe for greenfield developments that include digital products that leverage fitness trackers and mobile communications. Mass Mutual’s startup, Haven Life, and John Hancock’s Vitality products are examples of insurers reaching new market segments via a new brand or new products. For an expanded view of greenfield developments in insurance, read Greenfields, Startups and InsurTech: Accelerating Digital Age Business Models.

We Will Embrace the Platform Economy and the Shift to Digital Insurance 2.0

The next generation of core, digital and AI, cloud computing and partner ecosystems have opened a door for insurers in the platform economy, creating the art of the possible by enabling agility, innovation and speed in a time for rapid market changes. Cloud deployment of digital-ready systems can unify an insurer’s environment and prepare it for growth. Just look at the growth and value of other companies using a platform model, such as Apple, Uber and now Lemonade.

The benefit of cloud platforms is in full swing, but from a utilization perspective the insurance industry is only scratching the surface. For insurers preparing “digital first” business models, new products such as pay-on-demand, pay-as-you-use or pay-as-you-need will require the shift to cloud business platforms. The hallmark of a cloud business platform as a new business model paradigm is collaboration via data and information sharing and subscribing (not owning). As a result, traditional boundaries between insurers, partners, third parties and even other industries are being replaced with market dynamics that open doors to improved operations and revenue outcomes.

On behalf of everyone at Majesco, I sincerely wish you and your organization a Happy Digital New Year!

Update IT Systems One Slice at a Time

Every business today has legacy processes and systems and faces the dilemma on how to transform the business to adapt to the rapidly changing market dynamics that are driving the shift to the digital age. Is there a proper approach? Insurtech is embracing these dynamics and powering the shift through the significant capital flowing to new technology and startup companies from MGAs and insurers. There is much discussion and debate on how the shift will reshape the insurance market as we have known it for the last 50 years. But the industry should not forget that this same disruption has also affected other industries such as retail, media, travel, telecom and banking, where successful companies created new business models, technology solutions and more.

The insurance industry has long had a degree of protection from new entrants, provided by the complexity of the regulatory environments. However, regulators are quickly realizing they need to understand the new digital technologies and work with the insurance industry to integrate them into the market. Today, we are seeing that new entrants are making strong moves into the market by working with regulators. At the same time, existing insurers are bringing new, innovative products to market within their current businesses.

Irrespective of where one operates within the insurance market and across the insurance value chain, change is coming. The change is being driven by a combination of new customer needs and expectations, the rapid adoption of new technologies that offer significant opportunities to innovate and the changing market boundaries that expand market reach. The result is the rapid emergence of new entrants who see the selling, marketing and servicing of insurance in a very different light to the more traditional entities.

See also: How to Enhance Customer Service  

For existing insurers with legacy technology estates, tinkering around the edges or waiting to be a fast follower will not work, given the pace of change. As we have described in our research, Future Trends 2017: The Shift Gains Momentum, we are experiencing a tectonic shift that is creating a market dynamic that we call Digital Insurance 2.0.

If you embrace the need for change, what should you do to help adapt and innovate for the new world? Which slices should be approached first? Here are some suggestions:

Understand and Listen to the Customer. This is basic stuff, but the industry does not do it so well. In Majesco’s research, The Rise of the New Insurance Customer and The Rise of the Small-Medium Business Insurance Customer, insurance ranks at the bottom in its interactions with customers. In today’s digital age, the customer is in control. So, to transform a business, it is imperative to take the time and make a concerted effort to understand your customer needs and expectations … because your new competitors are.

Evaluate alignment of your strategy to your current systems’ infrastructure and organization. You’ll most likely find that your legacy systems’ estates are inhibiting your ability to change, let alone shift to Digital Insurance 2.0. Digital Insurance 2.0 requires a modern, open architecture that is cloud-ready and has open API capabilities to integrate new data sources, new technologies and more. Trying to apply a closed technical infrastructure to address the needs of Digital Insurance 2.0 is the proverbial square peg in a very round hole.

Prioritize. You can’t flip an established business on its head overnight. It’s just not going to happen. You need to grow the existing business while transforming and building the new business. This is crucial. Marketing and distribution should not pull back from traditional business in anticipation of the launch of new business models, new products or new channels. The current business is funding the future and needs to be kept running efficiently and effectively as the market shifts.

At the same time, you need to optimize the existing business while building the new businessIdeally, one would seek to transform a “sliver” of the operation which goes from “front-end” right through to the “back-end” function. If an organization’s teams have been working toward placing digital front ends on the traditional business to engage customers, they shouldn’t stop in the middle of the bridge. Any process that can be optimized on the traditional side will help to maximize the existing business, reduce the cost of doing business and provide a bridge from the past to the future while beginning to enable realignment of resources and investment into the new business. These are very often the incremental changes that will also gently shift the customer base through new ways of doing business.

Evolution vs. Revolution. Evolving a business is not going to be without its difficulties; but the greatest risk is allowing “old thinking” to solve “traditional issues.” This is not an ageist issue but a state of mind – “We cannot solve our problems with the same thinking we used when we created them.” – Albert Einstein.

As you bring your thinking into what the new world looks like – most likely it won’t look like what is currently in place. From an organizational perspective, one should also be very open to creating “greenfield” entities — new structures built on a clean slate approach rather than replicating the traditional silo approach so frequently seen in large corporations.

Increasingly, insurers are developing a new business model for a new generation of buyersSome insurers have made the mistake of envisioning their digital front end as their big leap into the future, not realizing that they have only just touched the new landscape. They need a strategy for a new business model that supports simultaneous leaps forward that will create new customer engagement experiences underpinned by innovative products and services. This will create growth, competitive differentiation and success in a fast-changing market.

Creating the requisite infrastructure to address the realities of the market shift shouldn’t be underestimated; it will not be a trivial investment. Many insurers are looking at justifying investment based on growth strategies as well as competitive survival. Strategically, more are moving to the buy vs. build approach. Forward-looking companies are seeking a cloud-ready platform with a modern architecture that can support all the insurance business functions, as well as increasingly sophisticated digital and data capabilities to support the customer and distribution channels.

See also: Roadblocks to Good Customer Relations  

These solutions seamlessly integrate core insurance processing with a growing ecosystem of other technology providers, third-party data sources and the growing number of external sales/service platforms or marketplaces. As systems and their underlying architectures become more open, products and services will be sold and serviced as part of “non-owned” processes. As a result, insurers will need to integrate their data collection and transactional requirements into portals and platforms that they don’t control directly.

Clearly, we are seeing the shift to Digital Insurance 2.0, a key topic of discussion and strategic planning in the boardroom, though many may not fully appreciate the extent and ramifications of this shift. Truly transforming a business to Digital Insurance 2.0 will be a customer-centric, digital-first endeavor. The digital age shift is creating both a challenge and an opportunity for insurers. The time for plans, preparation and execution is now — recognizing that the gap is widening and the timeframe to respond is closing.

This article was written by Mike Smart.

4 Ways That Digital Fuels Growth

In my last three blogs, we discussed what it means to be a digital insurer and how digital preparedness looks much like a fusion reactor — accomplishing something we called Digital Fusion. For a recap, you can begin with the blogs here. In the November 2017 issue of Canadian Underwriter, I also discussed why Digital Fusion is necessary and what it takes to become a digital insurer. We gave some specifics regarding how digital preparedness meets insurer needs throughout the insurance process. Today, we’ll look at how insurers will benefit from Digital Fusion, but we will home in on growth as a primary benefit — because digital strategies should never lose sight of their focus on growth. Digital Fusion enables growth.

Platform Shifts at the Core of Digital Growth (Systems)

No matter what lines of business an insurance company sells, it is going to want to accept new technologies and data sources into its unique ecosystems. Legacy core systems currently stand in the way. These systems have proven their capability to run traditional business models (Insurance 1.0), and they are mission-critical transactional systems that ensure continuing operations and compliance. However, over time, these systems have generally been cobbled together through expensive, high-level and limited integration points. These ecosystem solutions are often originated at different enterprises with different architecture, technology and even data models. Out of necessity, they were “integrated” for positioning as attachments to the primary core system. This may have sufficed to address short-term needs, but the approach falls short in providing differentiated customer experience and deep engagement because the solution will simply be the façade painted over the top of the insurer’s transactional systems.

See also: How Sharing Economy Can Fuel Growth  

Rather than a retrofit architecture, the next generation of core is a complete architecture redesign that fuses common capabilities across transaction processing, insights and engagement needs with a strong “find and bind” integration architecture to tap into an ecosystem of innovative data and solutions. It is open to non-native components, supports rapid change to adapt to shifting industry needs and allows for continuous innovation. It can generate analytics and calibrate the customer-centric solution without losing speed or increasing total cost of ownership. That positions the insurer for market adaptability, innovation and, most importantly, continued growth.

Speed-to-Market Growth — Evidence for Agile Digital Connectedness (Innovations)

Part of the fascination of Digital Fusion is an acknowledgment that the sky is the limit and that digital thinking will provide growth through speed.

Let’s look at an example from auto insurance. Vehicles are able to tell us more and more every day. We started with telematics being able to communicate miles driven. Then we added capabilities such as speed, acceleration and braking habits. Carried to the limit, however, automobiles are mobile data nets. They can know where traffic is, where most accidents occur, how closely cars are following each other and even the temperature outside, including if ice is building on the roadways. Most have sensors that know when impact has happened. Consider all of the data that can be fused into these products and their analysis to provide real-time value as well as operational value. The P&C insurer that can apply all forms of digital content (social media usage, localization, IoT, mobile usage while driving) and also have access to relevant transportation data will be far more liable to be able to price competitively. Add another layer: digital feedback. How can the insurer rewrite daily driving scenarios with simple communications back to the insured to reduce risk or to provide value-added services? Insurers in all lines of business will be dramatically improving their use of real-time feedback in the coming years.

But that capability is only the tip of the product iceberg. What if the insurer could take that information and roll it into a new usage-based product in a matter of months across all geographies because it is employing a cloud “find and bind” architecture, allowing it to freely use innovations without massive integration work? That is the promise of Digital Fusion. Traditional platforms can’t keep up with innovation growth. “Find and bind” architectures facilitate growth through innovations.

This isn’t just a vision of the future. Majesco is currently working with companies that have already implemented frameworks where it is taking “months not years” from product idea to market launch. To view some of those examples, consult the recent Majesco white paper on cloud business platforms.

Big Growth in Smaller Packages (Products and Experiences)

Digital insurance 2.0 represents a new age of insurance that requires a new way of understanding how digital platforms will affect insurance growth — that much growth will come through segmentation. What does this look like?

  • Higher volumes of lower transaction values.
  • Personalized service down to the individual level, even if the insurance is sold to groups.
  • Micro-duration insurance priced and sold “on demand.”
  • Insurance that is so personalized in use that it must use AI to consolidate data, analytics, pricing and underwriting.
  • Low-touch operations with a high-touch feel using cognitive communications.
  • Much of this is accomplished with a micro-services approach, instead of a core system administration approach.

Digital Fusion will provide insurers with multi-channel engagement, using journey maps, highly specialized apps and content to face customers with personalized experiences. But then it will go one step further, into usage analysis, so that insurers will be able to use data to measure and tweak processes.

Engagement + Insights = Growth (Relationships)

Digital apps are known as systems of engagement. Analytics apps are known as systems of insight. In a digital insurance platform, apps do not operate within silos. They are exposed to each other so they can provide power through Digital Fusion.

The power that comes through app fusion is specifically related to innovation and growth because it represents cyclical improvement. Insights will fuel new methods and measures of engagement. Enhancements to engagement will create deeper knowledge and expanded growth.

This is important because most insureds (individuals and businesses) want to be known. They trust an organization that they feel understands their needs and engages them. This makes Digital Fusion not only a platform for growth, but a platform for relationship-building. Great relationships will fuel healthy growth and high retention.

See also: Core Systems and Insurtech (Part 3)  

In Summary

Now, when someone asks why the organization should be considering digital transformations, you can say, “growth,” and share this four-point primer on how digital enhancements are going to yield growth. To recap, digital insurance platforms provide:

  • Digitally capable systems, without the distractions of infrastructure and operations
  • The ability to plug in innovations
  • A framework for creating a broader range of products with improved user experiences
  • A steady stream of valuable insights that will perpetually provide relationship-building ideas for engagement.

Plus,

  • More profit with a better process
  • Lower risk at lower cost while building a future-ready insurance operation

At Majesco, we are reimagining and providing the next generation of digital insurance platforms to insurers within all lines of business. To dig deeper into digital platform transformation, be sure to read Majesco’s thought-leadership paper, Cloud Business Platform: The Path to Digital Insurance 2.0.

This article was written by Manish Shah.

What SMBs Want in Group Insurance

In my last blog, we established the rationale for group and voluntary benefits providers to consider new business and technology strategies. The market is changing. Market drivers should be pushing carriers to recreate themselves to meet the needs of employers and employees.

As a part of that blog, we touched on group and voluntary benefits for the small-to-medium business market. Nearly every group insurer recognizes that there is opportunity within the SMB market segment, but they need confirmation that: a) They understand what SMBs really want from group and voluntary benefit providers, and b) they grasp how they can employ technology to meet those needs.

So, in today’s blog, we will look at the answers to those issues in greater detail.

What do SMBs really want from their group insurance providers?

SMBs want insurance without huge costs. They care about premiums, and they pay attention to how much it costs to simply administer benefits. It takes time to educate employees, enroll them and handle their day-to-day benefit issues. SMBs recognize when an insurer is taking steps to remove administration hurdles and headaches, and they appreciate a streamlined, automated process that will reduce internal administration.

SMBs see innovative voluntary benefits as a differentiating employee acquisition and retention strategy. The unemployment rate is at a record low 4.1% in the U.S., plus we are seeing an increasing move of millennials starting new businesses and a shift of many into the gig economy.  This means that job seekers have options and choices. So, employers must have competitive and compelling voluntary benefits packages that meet the needs and expectations of a changing workforce.

Wearable technologies make a great addition to SMB employer offerings. Employers want health-focused, wellness incentives for healthy habits and exercise to keep costs low but also to align to changing expectations. In our new consumer research, The New Insurance Customer – Digging Deeper, we found that all generations use fitness trackers like Fitbit and that using a fitness tracker is one of the top three digitally performed activities that will have an impact on insurance. So, group and voluntary benefits providers that can integrate products with wearables or mobile tracking may get a second look.

SMBs want to have a wider selection of voluntary choices from their benefit providers. With the emergence of a new set of employee expectations and a competitive marketplace for talent, particularly for millennials and Gen Z, many companies are recognizing the value of voluntary benefits and the potential to offer options that appeal to the unique needs of different employee segments. Each segment has different needs and expectations, and a one-size-fits-all offering does not necessarily work.

See also: SMBs Need to Bulk Up Cyber Security  

Millennials and Gen Z are carrying large student debt loads, and many Baby Boomers are delaying retirement and are facing rising healthcare costs and low wage growth. In line with these issues, there are several voluntary benefit options that are expected to grow in popularity for these different generational groups among mid- to large-sized employers, according to Willis Towers Watson:

  • Long-term care – 30% now, 52% by 2018
  • Student loan repayment – 4% now, 26% by 2018
  • Pet insurance – 36% now, 60% by 2018
  • ID theft – 35% now, 70% by 2018

Self-funding is an area of interest for SMBs. SMBs that have carefully weighed the risk of self-funding, and that have a reasonably healthy employee base, stand to save a tremendous amount of money. Self-funding, however, still requires a carrier of some kind for administration purposes. Insurers that design self-funding plans into their overall offering stand to gain, because they can offer it as a “future” option for employers that may want to change or as an instant option for those that are ready today.

Group insurers can also look to the consumer market for preference and demand trends. In Majesco’s report, The Rise of the Small-Medium Business Insurance Customer, we found that, “insurers should reevaluate their digital and business strategies for small business owners and align them more closely to personal lines.” We also found that:

  • SMBs are thirsting for products that will lower their risk. SMBs are highly risk-conscious, and very in-touch with their employees, making them an excellent market for group products. The desire for lower risk also makes them likely to be open to technologies that will assist.
  • They are not unwilling to share relevant data if it gives them discounts or added protection. This will allow insurers to better control risk over smaller employee populations.
  • They are ready for easy-to-understand and easy-to-purchase solutions. The smallest businesses, those with one to nine employees, represents the largest share of the SMB market, yet they find it much harder to research, buy and service insurance. New insurers or MGA startups are capitalizing on this gap in service.
  • They are willing to break from tradition. SMBs have extremely low loyalty rates across all lines of insurance, and they are highly receptive to insurers with non-traditional offerings or value-added products.
  • They long for personalized service. This doesn’t mean that they need face-to-face service. It means that they need an organization that can customize products to fit the business need and have easy-to-use touchpoints for administration and communication.

What should group insurers seek from technology to meet the needs of the SMB market?

Here are some high priorities that group insurers should consider when they are looking at technology options:

Digital front end

In all of Majesco’s research, we have found that the most important driver for SMB buyers is ease of research, purchase and servicing. A digital front end will provide engaging, easy enrollment. It should come with claims technology and tracking that makes the process simple. It should somehow manage a process of continual engagement. It should provide service options that make it simple for SMB HR departments to administer the products, plus it should offer self-service administration options for employees to remove simple tasks from HR.

Speed to market with new products

Open enrollment happens every year, and it is on a fixed schedule. New products can’t simply be rolled out at any time. Insurers need quick methods for defining and testing new products, so they can offer and be ready when employers are putting together their benefits packages. Technology can help. Today’s cloud-based group product alternatives include pre-built rates, rules and products that can be up and running in a very short time. Group insurers can use these outside of core systems to add new products, services or whole new lines of business.

This is especially effective when considering the development of new personal property and casualty insurance as voluntary insurance. Many group insurers can’t consider these new types of offerings without first acquiring the technology to make it happen. Speed-to-market solutions are now far easier to implement and use than with traditional group systems.

Actionable data and consumer insights down to the individual consumer

Group products, and even SMBs, aren’t all governed by HIPAA-level data constraints that amalgamate individual data into company or community pools. Many types of voluntary products will yield individual data that can help employers and insurers manage risk.

Actionable data, such as social data, wearable data and behavioral data, should be gathered and analyzed. Insurers need a data framework in place that will add value to employers and employees.

An ecosystem for benefits administration

Group insurers should avoid burning their IT budgets with over-customization, or intensive integration or the maintenance costs of trying to keep obsolete technologies alive. An ideal technology solution leverages the best solutions in the market by building an ecosystem of best-of-breed solutions coupled together with a framework that will allow the ecosystem to accept plug-ins for today’s and tomorrow’s services and technologies.

The digital era shift is realigning fundamental elements of business that require major adjustments from insurers for them to survive and thrive. There are a multitude of potential futures for group, employee and voluntary benefits insurers in an increasingly volatile world. The rapid and unprecedented pace of change will drive out old business models and allow new ones to flourish with the introduction of products and the offering of new services, and much more, from both new insurtech startups and established insurers.

See also: Cyber Insurance Needs Automated Security  

At the heart of the disruption is a shift from Insurance 1.0 of the past to Digital Insurance 2.0 of the future. The gap is where innovative insurers are taking advantage of a new generation of buyers, capturing the opportunity to be the next market leaders in the digital age. The next wave of growth is expected to come from their ability to provide superior customer experience – not just in comparisons with other insurers but also in comparisons to all companies with which their customers interact.

There will be constant pressure from startups backed by venture capital, the M&A between traditionally different businesses like CVS and Aetna, the entry by big tech such as Apple, Amazon and Google into insurance and the digital transformation of existing insurers in the digital race to meet those needs and capture more share of the enormous opportunity in the market.

The time for understanding, planning and execution is now to capture these new opportunities for group, employee benefit and voluntary insurance. Those who recognize and rapidly respond to this shift will thrive in an increasingly competitive industry.

This article was written by Prateek Kumar.

Why Commercial Insurers Can Rock

Commercial insurers have every reason to be optimistic. Thanks to the gig economy and the sharing economy, business launches are on the rise. And even though not every business launch is the next Fortune 500 company, insurers that are poised to take advantage of volume may find themselves with impressive market share.

Here are five quick reasons that commercial insurers in every line of insurance can be excited.

  1. Demographics are pointing to short-term and long-term growth because growth fuel will be coming from two separate sets of entrepreneurs with separate timelines for business maturity.
  2. Technology is supporting new channels for acquiring business that were not feasible before. Commercial insurers, in many cases, can look at current direct-to-consumer trends for real insights. Improved data use will provide better custom-fit insurance solutions for small and medium-sized businesses (SMBs).
  3. Product development opportunities for commercial insurers are growing out of gig-related business trends and lifestyle and purchase trends.
  4. Modern affinity groups will become more prevalent and important the more that people pursue gig-type employment. Insurers that traditionally offer voluntary benefits through employers will find that thousands of new types of business groups will become interested in both traditional and non-traditional products.
  5. More sharing, less disruption. As the sharing economy grows (and with it, a new type of commercial product need) commercial insurers will also be the beneficiaries of fewer negative disruptive trends, such as vehicle autonomy.

The further we dig into the gig economy, the more we find that small efforts by commercial and specialty insurers could yield big results. If an insurer is looking to build a case for preparation, some of the following points may be excellent support.

Gig workers, millennial entrepreneurs and senior entrepreneurs

Demographics are painting a clear picture of the new economy from the ground level. As we pointed out in our report, Future Trends 2017: The Shift Gains Momentum, project-based work and new businesses are on the rise.

The emergence of the “gig” or “on demand” economy is made up of individuals who work as freelancers, independent contractors for themselves or independent contractors for on-demand service providers. The gig economy has increased the number of small businesses. The 2016 version of Upwork and the Freelancers Union’s annual survey, Freelancing in America, estimated that 55 million people, or 35% of the U.S. workforce, have chosen freelancing as their means of work.

See also: Commercial Insurers Face Tough Times  

While freelancer and independent contractor work arrangements are not new, the relatively recent trend of on-demand workers, where workers and clients are typically connected through a digital platform, have caused state regulators and insurance companies to wrestle with questions of worker safety, liability and employee benefits. A growing list of insurers are providing products for the fluid dual coverage needs of people working through ride-hailing services like Uber and Lyft and home-sharing services like Airbnb. Insurers are also providing for the unique coverage needs of workers and companies engaging in contract-driven work.

Many of these independent jobs turn into larger businesses, and insurers can find relevant business launch trends among two separate groups — aging millennials and retiring boomers.

The Kauffmann Foundation’s statistics on entrepreneurship indicate that the “peak age” for starting a business in the U.S. is around 40. Millennials are on the cusp of mass entry into the “peak age” bracket for entrepreneurship. They show a strong desire to start businesses. By 2020, more than 60% of small businesses in the U.S. will be owned by millennials and Gen-Xers.

Baby Boomers are reaching retirement age in ever greater numbers. As they move to retirement, some will seek “gig economy” businesses and jobs to supplement their income. Many will start their own businesses. For those who already own their businesses, they will potentially pass them to the next generation. For those starting a business, this represents a growing segment.

In either case, the trends will cause growth in the need for commercial insurance. For more information on how demographics is shedding light on growth opportunities, read A New Age of Insurance: Growth Opportunities for Commercial and Specialty Insurance in a Time of Market Disruption.

Greater access to small businesses

Traditionally, commercial insurance was sold and serviced by agents and brokers. Smaller businesses were often underserved because they were simply difficult or expensive to reach. For the underwriter, they were also a bit cumbersome. Was it worth the time spent in research to underwrite the business? With small businesses, cookie-cutter products were an effective solution. But today’s small businesses are too varied for effective low-volume underwriting.

Digital sales and service will effectively fill a void for millennial and Gen X business owners, who prefer that kind of service for most every other transaction. Our research, The Rise of the New Insurance Customer, showed that all generations use multiple methods to research insurance prior to buying or renewal, but Gen X, Millennials and Gen Z use the widest variety of options, including digital channels like e-mail, texting/messaging/chatting and social media.

Like personal lines, commercial lines have historically relied on macro segments for classification and pricing purposes. With the advent of more data sources and sophisticated analytics, commercial lines have developed new segments for insurance like professional liability for specific businesses, all-terrain vehicles, yachts and pleasure boats, wineries, country clubs and numerous others.

In many cases, the business sales and service model for gig individuals and SMBs will be patterned off of modern direct-to-consumer models. Some insurers have already been capitalizing on the similarities. Berkshire Hathaway, Hiscox and Homesite are all examples of successful small business coverage direct writers that have found a formula that works.

Group purchasing and commercial and specialty product development

The gig economy is naturally isolating individuals who used to be covered under employers for standard health, life and other core employee benefits and voluntary benefits. Those who leave their jobs for gig-type employment will often take portable benefits with them, switched into individual coverage. They will be assuming a larger load of their core benefit costs or going uncovered. This will create a natural pooling. New potential “affinity” groups will arise with insurance opportunities for both group carriers and commercial insurers.

New work habits and preferences will also create new needs. For example, there is growth in demand for temporary work spaces, temporary storage spaces and occasional use of vehicles and equipment. Commercial insurers will be filling the insurance gaps for these types of policies. In many cases, the lines between insurance types may begin to get fuzzy as commercial insurers create risk products that go beyond personal lines but that still contain some of their attributes.

See also: Gig Economy: Newest Tool for Insurance  

As some personal lines business is lost due to vehicle autonomy and manufacturer liability (such as at Volvo) or sharing liability (such as at ZipCar and Maven), commercial insurers will be on the flip side of receiving additional pooled business. Many commercial insurers, already adept at handling fleet dynamics and logistics liabilities, will be extremely comfortable shifting gears and accepting other types of pooled risk.

If commercial insurers are truly interested in expanding into gig-created space, they should prepare their systems to handle not just large groupings of risk but individualized data contained within the risk pool. They should also keep tabs on mobile and insurTech developments, keeping their eyes on apps that cater to group sharing of any type of resources. Mobile apps may open commercial doors to unique product development. For example, an insurer may find that only one app is traditionally used by commuting cyclists or bike couriers. One unique product offering may help that insurer corner the market on a nationwide community.