First published on LinkedIn on 16 October 2017.
I was asked to kick-off London’s InsurTech Rising 2017 conference this morning, talking about how insurers can refine their digital strategies. Below are some of the key points from the session.
During the time in which global GDP has doubled, the GDP of the tech industry has multiplied by fourteen. Corporate IT spending has reached approximately six trillion dollars, making tech the third largest economy in the world. So why do productivity gains remain stagnant? Of course, the technology revolution can create a step-change in the insurance industry, but only if insurers think about both ‘the what’ and ‘the how’; not just technology but organisational structure. Going digital in silos will not be enough.
In 2005, there were approximately 1400 InsurTech companies and $2.7 billion in funding. In the twelve years since, the proliferation of data and analytics has drawn a great deal more attention to the market. Today, it is increasingly crowded, with approximately 4700 companies and $48.5 billion in funding.
If insurance companies hope to survive in the throng of new talent, fresh ideas, and diversifying customer demands, they must digitalize. But if they wish to flourish, they must also meet three key challenges: speed, scale, and value.
The first challenge, speed, is perhaps the issue that large incumbents struggle with most. Long-running business practices are deeply ingrained at every level. Even those incumbents who have progressed with their digitalisation process still take too long to change the way they underwrite. Meanwhile, InsurTech start-ups, who do not come with the baggage of a legacy are able to quickly adapt to customer needs.
The second challenge, scale, is equally problematic. All major insurers have put in some effort to digitalize, but in today’s market a ‘digital department’ or ‘digital lab’ will not suffice. Within the next half-decade, digital will be the standard. Running 5% of a company like a digital start-up and keeping the rest unchanged does not make an insurer a digital player. From PR to marketing, every department needs to be digital-ready and working together as a cohesive unit.
Finally, there is the challenge of value. With ever-more competition, incumbents cannot rest on their laurels, satisfied with adding value at the end of the process. Insurers need to start looking at uplift, revenue, and core savings as measurable, concrete benefits. The whole customer experience needs to be reimagined in a way that makes added-value clear to both company and customer alike.
If incumbents maintain the status quo, productivity loss is inevitable. To combat this, some companies are enacting technological changes, whereas others are implementing organizational ones. To choose just one of these is to underestimate the challenges the industry faces. Fundamentally changing both is essential.
Insurers must adapt to meet the challenges of the industry’s digital future. The customers of today and tomorrow expect nothing less than a fully-digital, customer-centric, agile approach that responds to their latest needs. This change is not unrealistic, it has been successfully implemented by countless other industries. By meeting the challenges of speed, scale, and value through multi-dimensional change, incumbent insurers can ensure that the future belongs to them.