According to the website RedPixie, insurance companies live on borrowed time at the moment. If they don’t change and develop their business to a more digitalized form, that could lead to the death of insurance companies in the future.
Insurance companies need to adapt to the technological revolution that takes place right now, and they need the help from tech/insurtech companies that already know how they are going to survive this revolution.
The technologies that insurance companies need to adapt to are IoT, Big Data Analytics, The Cloud, Machine Learning, Market Automation and Artificial Intelligence among others.
Plenty of insurance carriers already grabbed the bull by the horns and looking for tech companies to co-operate with, but how exactly are they going to work with the technology and how many businesses are adopting these technologies?
Here’s how the RedPixie website describes how businesses need to change, or they will be replaced:
“Compared to sectors like retail, the insurance industry is still early in its digital transformation.” – McKinsey
But, ‘within the insurance sector, top-quartile DQ [digital quotient] performers are generating a CAGR [compound annual growth rate] of 6 percent compared to 3.9 percent for the average player and substantially higher profitability’ according to the same report.
The leaders of the insurance world are making progress, but much of the industry has yet to catch up.
Why Insurance Companies need to Improve
Many established insurance firms don’t see any reason to overhaul the technology they’re using.
The problem with that is that the insurance landscape is in a period of dramatic change. Standing still means falling behind.
Price comparison sites have boomed over the last decade, opening up the insurance world for the consumer. Customers are no longer loyal to particular providers. They visit price comparison sites and choose the provider with the lowest price and the best online reviews.
Many insurance businesses are already facing challenges keeping up with changes in customer behavior. For instance, in the life insurance industry.
“Real growth between 2005 and 2015 has been negative. Sales of new policies have fallen from 17 million per year in the 1980s to around 10 million today.” – According to McKinsey’s 2016 report.
And those challenges are only set to get worse new entrants gobble up market share. Across the whole financial industry, a wave of hungry tech start-ups is threatening to eat the incumbents’ lunches. The insurance sector is no different. Your insurance firm could come under threat from:
Some InsurTech players, such as P2P insurance start-up Lemonade, seek to directly challenge incumbent insurance firms by offering a radical new offering to customers.
Most InsurTech start-ups won’t threaten insurance firms as a whole, but they do threaten sectors of their business.
Survival of the Fittest within Insurance Companies
The future of your firm depends on how you improve the customer experience and whether competitive storms. As McKinsey’s report says:
“Companies that offer best-in-class customer experiences grow faster and more profitably. To reach this level, insurers must relentlessly improve customer journeys across channels and business functions.”
Ultimately, every innovation that insurance leaders and InsurTech startups make trickles down to create a better experience for their customers.
‘68% of insurers say they have taken concrete steps to address the rise of FinTech in insurance,’ according to PwC’s report. For the other 32 percent, and the rest of the insurance industry, the mission is simple: evolve or die.