The Digital Transformation of Insurance
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The 2016-2020 Technology Challenges Reshaping the Insurance Industry: What They Are and How To Prepare
November 04, 2015
Never-Ceasing Customer-ICT Feedback Loop
Since the agrarian and industrial eras, society and commerce have been evolving from a Lego block experience, particularly with blocks that didn’t always fit together, to an increasingly more seamless real-time experience. This continual evolution, driven by the requirement to better meet customers’ wants and needs, is accelerated by a never-ceasing feedback loop between always-heightening customer expectations and the introduction of new information and communications technology (ICT). I don’t think it’s that much of a stretch to consider this feedback loop as being a co-evolutionary process between two separate but increasingly interdependent species: humans and technology.
Objective of This Post
I believe that insurance firms (meaning agencies, brokerages and insurers) have to be aware of, prepare for, and compete on the new foundations of commerce that will come into focus during 2016-2020 and beyond. My purpose in writing this post is to help insurance firms prepare by discussing the key technology trends unfolding throughout 2016-2020 that will reshape the insurance marketspace and the challenges that insurance firms will confront.
The 2016-2020 Technology Trends Reshaping the Insurance Marketspace
There are five key technology trends that have already begun to reshape the insurance marketspace. However, there are two important points that insurance firms should consider:
- The reality of customer experience weaves through each of the trends. Regardless of how insurance firms prepare for the implications of any one trend, they must always create and deploy initiatives based on a foundation of providing quality customer service.
- We discuss trends in the context of “marketspace” rather than “marketplace” because commerce is undergoing a rapid transformation from being primarily conducted in a geographic place to being primarily conducted in a digital space. And while no one can hear you scream in space, insurance participants, whether an agency, brokerage or insurer, wanting to compete successfully in a marketspace must learn to compete on the basis of time. Real time, that is. Or the screaming that will be heard will be customer rants cascading around the globe through social media.
Five Technology Trends Unfolding During 2016-2020
Onward to the five 2016-2020 technology trends (Figure 1) and accompanying challenges. These trends will actually feel and act more like a set of human-technology hybrid capabilities:
- Consumer media-casting
- On-demand economy
- Digital Gaia emerges
- Presence amplified
Figure 1: 2016-2020 Technology Trends
We don’t need to look at yet another series of graphs projecting or estimating the growth of mobility and smart devices to know that mobility is becoming life’s platform. We use our smartphones and tablets to conduct business, share our thoughts and opinions with friends, be entertained, check our fitness metrics, and collaborate with our colleagues. We even make the occasional phone call. Mobile devices and earbuds sprout around us regardless of what we’re doing. Our society seems to be becoming a nation of loners joined only by bandwidth.
There are two aspects of mobile use that need reinforcing: aspects of demographics and types of use. A July 2015 comScore report contained these two findings, among other conclusions:
- Most mobile use occurs through apps rather than through mobile browsers.
- Millennials, people 18-34 years old, spend an average of 50% to 100% more time on mobile than on a desktop.
The immediate challenge for insurance firms is not to jump to deploying mobile apps but instead to determine how current customers and target customers want to use mobile – app or browser – and for what functionality presale, during the sale and post-sale. The kicker is, of course, that whatever current and target customers answer now about using mobile does not guarantee their answers will remain the same the next time they are asked. Who said insurance wasn’t a fun industry?
Customers have an increasing array of social media to express their thoughts in words, pictures, sounds and videos. Just to select a few examples of consumer media-casting (or should that be “me-casting”) that Qmee reports happens every 60 seconds:
- Over five million videos are viewed on YouTube
- 293,000 statues are updated on Facebook
- 277,000 snaps are posted on SnapChat
- 1,800 posts are published on WordPress
- 1,100 photographs are posted on flickr
- 88,000 calls are made on Skype
- 67,000 photographs are uploaded on Instagram
One implication is clear to me: with this plethora of content, there must be a dearth of attention. The primary challenge for insurance firms is getting and keeping clients’ attention.
However, the challenge is not so much for an insurance firm to choose the right media to reach clients. The challenge is for an insurance firm to choose how to enable clients to access the content they want in a manner the want and when they want. One of the famous lines in the movie The Graduate was, “Plastics, my boy, plastics!” The uncle would, or should now, give the advice, “client focus, my boy, client focus!”
The great unbundling of traditional industries continues swiftly as startups abound in the marketspace all fighting for room on smart devices and recognition in the hearts and minds of customers. Uber and Airbnb are the on-demand services which most readily come to mind. But whether it is these two familiar on-demand services or others which may not be known as widely such as Instacart or Munchery, the reality remains: aggregators are bundling app-deployed demand on smart devices to meet specific customer needs while simultaneously unbundling well-known industries. Marketspace is being fragmented into small bits available at everyone’s fingertips.
The challenge for insurance firms is to identify where new app-deployed on-demand service firms can take profitable business and client relationships from activities within the insurance value chain. A second challenge is for insurance firms to consider creating and deploying their own on-demand aggregator capabilities. Not that long ago, Allstate acquired Esurance. What on-demand capability might an insurance firm acquire or create now to succeed throughout 2016-2020?
Digital Gaia Emerges
Gaia is the theory espoused in the 1970s that organisms interact with their inorganic surroundings on Earth to form a self-regulating, complex system that contributes to helping to maintain the conditions for life on the planet. A digital mobile Gaia is becoming more real as increasingly more physical artifacts, animals and people have IP-enable sensors embedded, attached, worn or ingested in them. These Internet of Things (IoT) objects will eventually form an ethereal layer over the entire planet.
In the digital, mobile Gaia insurance firms will have an opportunity – and challenge – to identify the new products and services, beyond providing cyber liability coverage that consumers will appreciate. Insurance firms will also be challenged to determine the partnerships they need to form from a variety of industries – from manufacturers to telecommunications and software firms to retail or wholesale distributors – to create and service the new IoT-driven insurance products.
In the 1960s, Marshall McLuhan wrote a book titled, Understanding Media: The Extensions of Man in which he stated that technologies would serve as extensions of the body and extensions of cognitive functions. He was spot on. Today and continuing throughout 2016-2020 and beyond, each of us has our individual presence extended and amplified using social media, real-time streaming video, IoT (such as wearables, vehicles outfitted with telematics capabilities) and mobile messaging and payment apps (whose capabilities will soon fuse because payments are really just another type of message). Where each of us lives geographically doesn’t matter. However, the extensible mobile digital functionality amplifies each of our individual presences by enabling us to be found by others, to find others and to conduct our activities of life when and how we want.
The challenges for insurance firms certainly includes becoming data analytics and visualization mavens, at least to the extent insurance firms decide to outsource the hands-on data management and governance aspects generated by each individual client (whether retail or enterprise). Other challenges facing insurance firms include determining:
- How each client makes their own specific digital presence known to others.
- Whether clients want to use each of their digital presences (because any one client will have more than one digital presence) for aspects of insurance commerce and interaction.
- How clients’ preferences of using their digital presence for insurance commerce and interaction changes over time.
From the Coffeehouse in 1688 to Digital Gaia
We’ve come a long way from Lloyd’s coffeehouse and not just in hundreds of years. Lloyd’s was an information clearing-house and a source of discussion about risk and acceptance (or rejection) of providing coverage. But the coffeehouse ship owners, merchants and investors didn’t have access to immediate information about what was happening in real time.
Information, whether text, sound, pictures or video, is now available instantaneously and customers are increasingly more demanding in their expectations about how, when and where they want to conduct business with insurance firms. Inanimate objects are becoming sources of real-time information and should be sharing space in insurance firms’ customer relationship management and/or producer productivity system.
The ultimate challenge for insurance firms is creating new strategies, business models and tactical initiatives to live in the digital mobile era rather than hanging on to the methods and technologies of the past.
What additional challenges do you see ahead for the insurance industry? How should insurance firms address these? Share your thoughts below.
This blog post is based on the presentation by the same title that Mr. Rabkin delivered at the Applied Net 2015 Client Network Conference.
Barry Rabkin, president of the insurance technology analyst firm Market Insight Group, is known for his research focusing on areas where current and emerging technology affects insurance commerce, markets, customers and channels. He has been involved with the insurance industry for more than 35 years. Before rejoining his own company in April 2014, he was a principal analyst at Ovum, where he was responsible for leading the global insurance research stream. Before that, Rabkin was responsible for leading the global insurance advisory team at Financial Insights, an IDC company.