If we were to relate the word ‘disruptive’ to any industry right now, it would be the insurance sector, with specific mention to ‘Insurtech’. For decades, getting insurance coverage was a rather staid, bureaucratic, and burdensome endeavour. The choices on offer were dominated by enormous companies with sales pitches that bordered on ‘take it or leave it’. In the past few years, however, there’s been a paradigm shift. The market dominance of the insurance behemoths is being challenged and undermined.
They’re having to react very rapidly to changes in the market all driven by digitalisation. These changes include increased competition and a much more discerning customer who will no longer think twice about changing providers.
We’ll take a look at the factors mentioned above, including their impact on the insurance industry these past ten years.
Digitalisation has shifted the balance of power towards the consumer. For one, there’s been massive growth in comparison sites which can show shoppers an array of insurance options. Now, consumers can expect to be offered a product that more closely reflects their specific requirements.
The old-fashioned insurance model required a dizzying amount of paperwork and health tests before a quote could be supplied. These days, data ecosystems are able to supplant the underwriting models of old. They do this by linking electronic health records in the public domain and third-party data to provide real-time pricing with accurate risk assessment.
There is also the phenomenon of digital-only companies. These are emerging at a fast rate and offer an attractive model to millennials. This makes sense given that millennials are now entering a stage in life where insurance is a much higher priority.
The widespread use of informal communication through artificially-intelligent bots have made complex self-service transactions widely accessible. This applies even when potential customers need to ask questions rather than simply select from a standard off-the-shelf selection.
For companies, advances in software capacity and A.I. have meant that enormous amounts of data can now be gathered. This data can be transformed into actionable insights for ‘insurtech’ companies.
Of course, this means some serious investment in modern systems capable of mining data efficiently. This is a challenge considering the giant legacy software systems that many large insurers are now faced with overhauling.
There are several new entrants in the burgeoning ‘Insurtech’ market. These newbies are already leveraging A.I. capabilities but can’t yet access the same distribution networks as bigger players.
Having said that, they could use their agility to repurpose and invent more consumer-centric products. That alone could allow them to capture a significant chunk of the market. That means a jump from static and slow processes to real-time and reactive services matching higher consumer expectations.
Customers are being smarter and more demanding when it comes to whom they give their cash to for coverage. On top of this, there have been key demographic shifts accompanying the rise in digitally-focused services and products.
Around 90% of millennials use a smartphone as their primary mode of digital interaction. The majority also live in urban areas and eschew private transport in favour of public services. So, for example, many young people are looking for temporary as opposed to more permanent car insurance products.
And, as they can do pretty much everything else at the click of a button, they demand customer journeys that are speedy, easy, and highly accessible.
Looking back at these trends, we can see that a lot has happened over the last decade. It’s certain that the insurance industry will experience many more changes over the upcoming decade. Many of which we can only guess at, just as we did ten years ago!