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Why 5G Will Rock the Insurance World

The first time I logged in to the internet, I had a dial-up modem and a large desktop computer with tower, a separate keyboard and giant speakers. After the dial tone, there were  squeaks and honks as the computer took its time logging in. Then the words flashed across the screen: “You’ve Got Mail.” It was an iconic moment for me and one that millions of people around the world would experience in their own time.

Then there were cellphones. You could literally talk to anyone anywhere, as long as there was a signal and you had saved some serious money. Later, smartphones were developed and once again changed the playing field. I found myself able to download apps that I didn’t know I needed, check my bank account or the status of my Amazon package and update my status from my phone – reaching all my friends no matter their or my location.

Long gone were the days of dial-up and slow connection speeds. Now, I find myself refreshing when my phone doesn’t access the site I want after 15 seconds.

All these developments in technology and society provided the finance and insurance industry with tremendous challenges. While other industries built new revenue streams on top of the internet and digital infrastructure, a lot of insurance companies are struggling with providing the most basic digital services to their customers.

And it’s about to get worse. 5G – a new form of mobile internet – is going to accelerate things. A lot.

5G means high-speed mobile internet

There are a lot of questions surrounding 5G services: What does 5G mean? How fast is it? When will it launch? Probably the biggest question surrounding 5G services is: How will we and our customers use it? One of the most important things to know about 5G services is that it will most likely bolster economies worldwide. The website Innovator cited a report by IHS Markit and Research Group that predicts “by 2035 5G will create 22 million jobs globally, generate $3.5 trillion in direct economic activity and fuel sustainable long-term growth to global real GDP.” 5G is a game changer, just like the internet, computers, motor vehicles, and the wheel. It will change the world as we know it.

What does 5G mean? How fast is it? When will it launch? Techopedia says: “Fifth-generation wireless (5G) is a wireless networking architecture built on the 802.11ac IEEE wireless networking standard, which aims to increase data communication speeds by up to three times compared with its predecessor, 4G.” Reports vary as to how much faster 5G will be; some reports say 10x faster, and other reports indicate that it could be 20x faster or more. Much of the improvement will have to do with locations and service providers, but it’s going to be a large jump. We may have to wait a little, but this train has left the station – and it’s not coming back. While 5G operators are beginning to roll out their systems this year, most markets won’t be up and running until 2019, and more likely 2020.

See also: What Will Operations Look Like in 2028?  

For retail, that sounds far away. For the insurance industry, with long planning cycles and gigantic project portfolios, that means “tomorrow.”

How will we use 5G? Many are questioning what the purpose is of faster service, especially those who are content with 4G services. 5G goes beyond the mobile phone user. While users may see a boost in service (especially in downloads and streaming), 5G technology is going to improve how the world operates. Users will have increased connectivity. Apps for which heavy computers are now necessary could transfer tremendous amounts of data quickly, probably providing digital services we can’t imagine today.

With a smart 5G strategy, the insurance companies could expand

One special case for the insurance industry: 5G technologies are going to streamline the Internet of Things (IoT), especially for consumer usage. So, after mobile internet, smart phones and 4G changed the way customers consumed, 5G is about to change everything again. Right now, our smartphones can talk to individual devices, but with 5G technology speeds we can further streamline these smart devices and achieve breakthroughs where they speak to each other instead. Imagine if your refrigerator could tell your oven when your steak had finished defrosting, and the oven automatically started pre-heating! Imagine that an oven could warn the customer that crucial parts are overheating, and a fire is likely. Imagine that an insurer informs the customer and that he can act on the information. Imagine how the customer would fall in love with his carrier or agent after he saves the customer’s house?

In addition to general consumer usage, 5G is going to make a huge impact in industry and commercial insurance. With 5G technology, we will be able to track shipments in real time, upload information from doctors’ offices instantly and watch videos everywhere, without having to consider the bandwidth. Autonomous cars may become a broad reality, as they can generate real time data with which to operate. Drones will be able to provide better feedback and travel farther. Industry and manufacturing automation can improve with smart factories and the use of artificial intelligence. Currently, there are some factories using artificial intelligence to trouble shoot designs, and IoT technology to determine when machinery needs servicing. With 5G technology, these types of programs can be adopted by more companies and expanded to further suit the manufacturing needs. All of this has tremendous impact on calculating risk and preventing claims – the core of our industry.

With smart vehicles being so much more efficient, and safe, we can expect to see insurance rates drop, according to an article on Innovator. We can also expect to see faster transactions and approvals. With a wealth of information at our fingertips, it may only be a matter of time before purchasing a home goes from a months-long ordeal, to something that takes place in a weekend (or faster) or even maybe without a bank at all.

“5G will impact every industry – autos, healthcare, manufacturing and distribution, emergency services, just to name a few. And 5G is purposely designed so that these industries can take advantage of cellular connectivity in ways that wouldn’t have been possible before, and to scale upward as use of 5G expands” — Don Rosenberg shared this thought as part of the World Economic Forum.

Rosenberg also said 4G led to innovations like Uber and Spotify. How will 5G affect, say, Facebook’s business model? What other changes have yet to be imagined?

See also: How Digital Platform Smooths Operations  

The world is constantly changing, though some “groundbreaking” innovations do little to change it. Then something like 5G services come along and completely change the foundation of how our world operates. 5G will change us, on a worldwide level.

What to do? Don’t love your products – love your customer.

Instead of fearing the next challenge after the landline-based and mobile internet, why should we not use this as an opportunity to expand our value chain? Why shouldn’t we put ourselves between the customer and product and service providers instead of leaving this interface to the customer to the old and emerging tech giants from California and China? Why shouldn’t we provide our customers digital products and services that relieve them of friction and pain in their daily lives? Why should not we use 5G as an opportunity to get ahead and become a trusted companion in the daily life of our customers? It’s still our choice.

5 Questions That Regulators Must Ask

Fast growth and disruptive strategies make the likes of Uber, Airbnb and Lending Club a vanguard of young, fundamentally digital companies that are changing the way people travel, save, learn, eat, pay, lend—and more. Typically positioned as alternatives, they offer, among other things, financial services without being banks, car services without being taxi companies and somewhere to stay without being hotels.

In other words, the companies don’t play by established industry rules. And that’s the reason regulators and courts in a number of countries struggle to make sense of the changed industry ecosystems they oversee as they try to determine whether to permit or prohibit these digital disruptors. We believe the choice doesn’t have to be black or white: Regulators will want to enable the potential of these digitally contestable markets to deliver efficiency and innovation, while minimizing risks for consumers and the burden of adjustment for incumbents. The question is, how should they approach this difficult task?

The entrepreneurs who create digitally disruptive companies are routinely guided by a number of related strategic questions. We believe oversight bodies can use similar questions to arrive at appropriate regulatory responses. Here we suggest five:

1. How can we better serve customers’ needs and wants?

Many of the new digital business models work by putting underemployed talents or assets—like spare rooms or underutilized cars—to productive use. These business models usually won’t fit into traditional industry categories, such as “hotels” or “taxis.” Consequently, to make sense of them, regulators should fully consider the perspective of the consumer, setting aside purely industry sector approaches and taking a market view—the market for overnight stays or for travelling within a city, for instance. This way, they can support the successful operation of the market as a whole, namely balancing the many different outcomes demanded by consumers, including price, quality, availability, choice and safety.

Doing so will enable regulators to make a sober and impartial assessment of a new player’s potential to improve or upset this balance. Ruling out new players from the start simply because they don’t fit an existing industry definition could deny consumers better or cheaper ways of fulfilling their needs and wants. Worse, a start-up whose activities fall outside the realm of regulation could decide to enter an unregulated “shadow” sector that could ultimately create even greater trouble for incumbents and consumers. The recent rise of the so-called shadow banking sector should give consumers and regulators alike pause for thought.
In practice, regulators may be constrained by existing laws; they can, however, start the conversation about how regulation will need to adapt.

2. Are we considering all the competition?

Within a digitally contestable market (for example, the market for payments) new entrants very often straddle multiple industries. A good example is Apple Pay, a new way of paying for things with an Apple device. It has the potential to reinvent in-store and mobile transactions, simultaneously disrupting the telecom, financial services and retail industries. The market for wearable biometric technology is another example, bringing together high-tech, mobile and healthcare services within accessories and apparel that needs to be demonstrably safe for personal use.

As digital markets run beyond industry boundaries, regulators in different industries will need to collaborate with one another to catch up. Collaboration between regulatory bodies, where appropriate, may be both necessary and desirable—not only to execute current responsibilities but also to create common frameworks that encourage businesses to invest in digitally contestable markets. This approach can drive growth and productivity for the economy as a whole.

3. Are we thinking globally?

Just as digital disruptors don’t conform to traditional industry definitions, neither do they confine their ambitions within national borders. Mobile apps can work in the same way the world over as long as there is unfettered Internet access, and providers want to back them with consistent services. Moreover, customer expectations exhibit a ratchet effect. If it’s possible to use a mobile app to arrange a ride in London, why not in any other city? Why should a consumer’s experience of VoIP services from the same provider vary from country to country?

The work of regulators will increasingly depend on international collaboration. National bodies should actively align their work programs to increase the evidence base, accelerate the uptake of “next practice” and coordinate regulatory responses where it makes sense to do so in the interests of consumers.

4. Where can we experiment?

Digital disruptors don’t just compete in existing markets—they explore, create, define and shape new markets. Take Postmates, a San Francisco startup launched in 2011 that has built its business model on the entire process involved in “getting things,” including queuing, purchasing and delivering. Consumers and businesses can use the company’s app to arrange for a “Postmate”—an individual with spare time and wheels—to buy and hand-deliver any item within a city in less than an hour for a distance-based fee starting at $5. Using technology to combine elements of the retail, courier, concierge and postal sectors, the company is opening up a market for integrated convenience services previously available only to the affluent. Postmates can now be found in 13 metropolitan areas in the U.S. and has inspired similar services in Europe. It is also developing a merchant program to enable local businesses to initiate deliveries to customers and establish virtual stores within the Postmates app.

Disruptive businesses don’t wait for market potential to be proved before they act—and neither should regulators. While regulators will always base their oversight activities on deliberative, comprehensive assessments, today they also need to become as agile as the new players to react quickly to events, or even anticipate them. Digital tools and techniques can help.
One example: A/B testing, frequently used by digital disruptors to run multiple fast experiments on small samples of their customer base. This enables them to refine and improve proposed changes to the online user experience—design, offerings, prices—before rolling them out in full. While taking care to secure the consent of participants, regulators could harness techniques like these to test regulatory adaptations. If a market’s participants innovate and succeed through speedy knowledge of what works and what doesn’t, why shouldn’t that market’s enabling framework benefit in the same way?

5. Do we know what’s around the corner?

Digitally contestable markets often catch regulators by surprise. The head of the UK’s Competition and Markets Authority called digital disruptors “a Schumpeterian gale” sweeping across the economy. To harness the power of this storm of creative destruction, regulators will have to do more than simply react to change. They also need to be prepared before markets are upended.
To prepare effectively, they should make renewed use of horizon-scanning activities to spot systemic risks and emerging trends. When postal agencies (and their regulators) were debating the competitive merits of “last-mile” delivery companies, did they really envisage the breadth of service integration that players like Postmates would provide? Regulatory agencies will also need to develop techniques that encompass new technologies, encourage innovative business models, and explore new and more effective policy tools.


Getting Started

The level of uncertainty generated by digitally contestable markets is unprecedented. New market dynamics are rapidly altering the boundaries and methods of oversight. Regulators will need to build new capabilities if they are to ask and meaningfully answer the five critical questions. They can start in three areas:

1. Talent: They should recruit people with experience in startups, to acquire the range of skills and mindsets needed to cope with fast-changing markets. Agencies should also ensure they have employees who are well-acquainted with disruptive technologies, whether through their work or simply in daily life.

2. Technology: To inform and enhance decision making, regulators should become comfortable with employing digital technology, including the “SMAC” of social, mobile, analytics and cloud. In particular, they should make full use of the intelligent data collection tools available today, including consumer apps such as Field Agent, as well as the burgeoning Industrial Internet of Things. Their goal should be to improve decision making using an evidence-based and data-driven approach. Beyond that, big data analytics can help them more accurately predict changes in customer and regulatory demand.

3. Tactics: To better anticipate and meet regulatory challenges, there are some no-regret steps regulators can take. For example, they can undertake “social listening” via Twitter, LinkedIn and other conversation spaces; this will help them identify future market players and spot market trends. Regulators should also participate in industry “hackathon” events to learn about the challenges entrepreneurs and innovators are currently facing, and even employ their own open, problem-solving events—physical or digital—to understand current concerns and explore potential solutions.

Digital innovation hasn’t changed the objective of regulation: promoting consumer welfare. But how to do it—developing and applying rules that deliver efficient and equitable outcomes—has become more complex and difficult. In economies increasingly populated by digital disruptors, the first step for regulators is to begin to question, think and act like the companies they oversee.

This article was originally published in Outlook, Accenture’s online journal of high-performance business. It is available here

Read more about digitally contestable markets here and ecosystem collaboration here.

Innovation in Insurance Begins to Refocus

With today’s fast pace of change, innovation is no longer a nice-to-have initiative, but rather a must-have, strategic mandate that is defining a new era for insurance – and separating future winners and losers. Today, it is not any one thing that is creating change, but the convergence of many things that are creating a seismic shift.

Strategy Meets Action (SMA) has actively tracked and promoted innovation in the marketplace for several years and has been publishing formal innovation research since 2012. In our latest report, Innovation in Insurance: Expanding Focus and Growing Momentum, we see continued progress, but with a refocus. SMA believes this reflects the realization that modernization of core systems is a foundational requirement for innovation.

At the same time, insurers’ innovation approaches and efforts are broadening. Insurers are getting outside-in views, engaging in open innovation and developing an ecosystem of outside resources to fuel the innovation journey. This move reflects a best practice from outside the industry: acknowledging that no business can expect to harness the future and all its conceivable possibilities on its own.

Within their ecosystems, insurers are primarily engaging with agents, business partners, software partners, customers, other insurers and a supply chain as catalysts for innovation. However, more outside-in relationships with high tech, other industries, futurists, venture capital firms and academia are beginning to take shape, as well. The ecosystem is gaining importance because leading insurers recognize that day-to-day operational demands mean there is a lack of time and resources for tracking, assessing and putting the implications for insurance into context. Also, the whole network benefits from the integration of new thinking as the input of the outside organizations helps to break down legacy assumptions.

The expanding focus and growing momentum for innovation is reflected in some key survey results, including:

  • More than a fourth of insurers (26%) have focused on innovation for five years or more, and 33% have focused on it for two to five years. That puts 59% of insurers focused on innovation for the last two years, highlighting the growing momentum. A majority of further 32% have made innovation a focus for two years or less.
  • Innovation leadership and organizational approach takes many different forms. Only 7% of insurers have a dedicated innovation area. More than half of insurers (51%) have no single area of the organization leading innovation. Nearly 28% of insurers have their strategy or R&D leadership/areas lead innovation. SMA believes this reflects the resurgence of strategy and R&D to provide an enterprisewide approach for innovation, maximizing the strategic impact and value of innovation initiatives to the organization’s Next-Gen Insurer vision and strategy.
  • Encouragingly, more insurers believe their investments are positioning them well ahead on the innovation journey as market leaders (9%) and movers (33%) as contrasted with those that are at the early stages of the journey as mainstreamers (22%) and those at the very beginning stages or not focused on innovation as laggards (9%). SMA believes this reflects the broadening focus of continued implementation of modern core insurance systems and innovation.
  • The top four industries influencing insurance in the next year are: healthcare (46%), with the potential influence of the healthcare insurance exchanges; high tech (45%), with the potential of Google, Amazon and Apple entering or disrupting insurance; telecom (32%), with the race for the customer’s connectivity, data and services; and government (32%), with some states aggressively piloting new technologies such as driverless vehicles.
  • The focus and business drivers for innovation are changing, reflecting the shifting landscape of influencers, threats and competitors for insurance. Enabling growth (42%) and profitability (30%) moved into the top spots, up from second and fourth in 2013. But a bigger shift has also emerged, reflecting the demands of the digital revolution and outside industry influencers. In 2013, improving existing products and providing great service were in the top six. In 2014, there is a shift in focus to developing new products and engaging and strengthening customer relationships, which is directly related to meeting the new expectations of customers.

A new future is rapidly unfolding, and the pressure is on. Innovation can never cease. It must advance with urgency. Each and every day, insurers must recommit to their innovation journey and the culture they have created for it – and avoid falling into an operational trap.

As Charles Darwin said: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”

Innovation will be a journey of great disruption, great opportunity and great change. Have you started your innovation journey?