At the recent meeting of the Insurance Accounting & Systems Association, President Bill Clinton said in his keynote speech, “Share the future or fight over it.”
As an industry, we have a history of collaborating, which has benefited all of us, but we need to raise the bar to succeed in this fast-changing world. Other industries and businesses are changing all around us and seeking to encroach on and challenge insurance. So we must embrace open innovation, collaboration, crowdsourcing and ideation with new standards and at higher levels within companies, within the industry and even between industries.
The topics of innovation, change, and emerging technologies were the focus of this year’s IASA “Around the Horn” industry analyst panel. I had the pleasure of representing SMA, and as I prepared for the panel session I found myself taking a step back. I realized that when leveraging the vast base of SMA research and insights and blending that with the broader strategic business implications for the industry, a powerful story emerged. A wave of disruption and innovation has hit our industry with an intensity that we didn’t quite expect.
In the spirit of sharing, for those who did not attend, here is a summary of my rapid-fire responses to the panel questions to help inspire you, challenge you and get you to embrace collaboration as an industry to help you quickly define your future:
–Innovation is happening all around us. We are at the forefront of what is probably the greatest disruption in history: the digital revolution. And it is affecting every industry. This revolution is fueled by the breadth and depth of the new technologies that are changing customer engagement, transforming products and services, redefining business and revenue models, breaking down barriers to new entrants and more – look at the Apple iPhone, introduced 7 years ago, and the resulting destruction and construction of industries and businesses. Today, the bar is set at a new high. Operational excellence is an absolute. Innovation is necessary for future success. And the Next-Gen Insurer is being defined and shaped.
–Insurers must have a strong culture that combines the power of open innovation with an ecosystem that empowers collaboration. If we don’t define our own future as an industry, other industries may try to step in and define it for us.
–We must focus on the constantly connected customer. We all must recognize that, in this digital revolution, the customer is in control and is defining the channels that he or she wants to use – from purchasing through service. As insurers seek to become digital insurers, they must have unified digital strategies that create seamless, consistent and connected customer experiences in an omni-channel environment. Think like Google, Zappos, Apple, Nike, AT&T and others that are the new digital leaders.
–Product development and configuration are key differentiation levers. These capabilities are shaping today’s competitive landscape, with speed to market of paramount importance. The pressure to stay current, deliver new offerings and price accurately is driving many insurers to seek innovative solutions. The average new product implementation timeline is nearly 7.5 months. Less than 2% of insurers can implement in less than 30 days. But some innovative companies have found a way to implement in less than 5 days! Another emerging capability of even greater importance is the enabling of product co-creation – customers can help to configure their own products according to their wants and needs.
–Usage based insurance (UBI) is not just about product; it’s a whole new business model. UBI moves the focus from risk assessment to risk prevention. And its application is much larger than auto insurance. It is about the connected car, the connected home and the connected life. UBI is the precursor of a broader impact of sensors and the Internet of Things that will allow us to connect the dots between data for new customer products, services, outcomes and experiences – providing a real-time view of risk.
–Data is the new currency in the digital world. Data has always been seen as the lifeblood of the industry, but its strategic value is now at the forefront. And big data, business intelligence and analytics continue to take the insurance industry by storm. What is holding insurers back is the lack of a data management strategy and a deficient level of data mastery. Both strategy and mastery will be needed to unlock the full business value of data, whether transactional, unstructured, internal or external.
–Social media is a subset of digital data. Customers are sharing information about all aspects of their lives – social, pictures, online discussions, GPS, sensors, mobile technologies and more – and all this data is in the cloud. People are able to search their recorded memories and use new tools that can influence and shape their lives like never before. New companies are creating digital lockers for data that can be stored and managed by customers to be used in innovative ways. When new solutions like these form around customer logging activities, the question from customers will be: “Is the value of what I’m revealing worth the services I’m receiving in return?” The key issue will be the customers’ control of their data.
–Digitalization is happening and is dramatically destructive. A foundational change is taking place in the way all businesses are approaching value creation. In today’s hyper-connected world, companies are moving from managing value chains to managing ecosystems to power their businesses. The ubiquitous connectivity of people via the Internet and emerging technologies is disrupting traditional business assumptions about how to engage customers, the products and services offered and, ultimately, business and revenue models. Just look at these transformations: from the Yellow Pages to Yelp, hailing a cab to Uber or Lyft, booking a hotel to Airbnb and policemen managing traffic to managing traffic with crowdsourcing Waze. All of these represent the disruption happening all around insurance and point to the imminent disruption that will transpire within insurance.
–Mobile is much broader than the phone and tablet. It includes smartphones, MP3 players, e-readers, in-dash car electronics, cameras, portable consoles, home entertainment, appliances and any device or sensor that connects to the internet to share data. And there is now a continuing evolution of mobile apps from multi-purpose websites or portals to single-purpose apps. This will compel companies to design apps as a service layer within an enterprise technical architecture that will enable seamless integration and connectivity between apps – critically important with the Internet of Things.
–Cloud is increasingly mainstream because that is where the data is moving. Two years ago, it was an option in core system RFPs, whereas today it is increasingly a preferred choice. The future will be the Cloud of Things, a world of distributed data, devices, technology, intelligence, computing, etc. that is highly connected and will enable the creation of products and services.
–The issue is “customer empowerment,” not “customer-centricity.” Customer-centricity is a 1990s/early 2000s term and is only a subset of customer empowerment. We used to shape the customer experience; now it is shaped for us by the rest of the world. Customer empowerment defines new engagement models. As customers gain market power, they are increasingly comfortable with technology, have a stronger voice and use it to demand collaboration. Insurers must view all technology as touching customers, because it influences the customer experience, both directly and indirectly, ultimately shaping and defining the customer relationship.
–As an industry, we are seeing challenges to our long-held assumptions and business models coming at us every day. Technology is now super-connected, creating new experiences, new products and services, new outcomes and new business and revenue models that were not possible a few years ago. Just as the iPhone provided a platform of possibilities, core systems – integrated with an array of new technologies like mobile, social, Internet of Things, cloud, big data, analytics, driverless vehicles, biotechnology and much more – have the potential to transform our industry … and to do it on our own terms.
So be inspired. Be creative. Be collaborative. Be bold. Let’s create and share the future together!