In recent years, investments in the insurance technology space have skyrocketed, giving way to yet another example of an industry in an ongoing state of upheaval. From retail to healthcare to transportation, technological advances and shifting consumer expectations are fundamentally transforming business models and consumer interactions with companies. But unlike in other industries, the story we’re beginning to see emerge in the insurtech space is one of increasing collaboration rather than cutthroat competition, according to Capgemini’s inaugural “World InsurTech Report.”
The world of insurtech is by no means a monolithic one. Emerging players represent a variety of new business models, ranging from full carriers to niche innovators looking to fill very specific voids within the insurance customer experience. The latter group, referred to Capgemini as “enablers,” are where we’re seeing some truly interesting partnerships transform the insurance landscape of the future.
The inherent complexity and regulation of the insurance industry makes it a harder industry to quickly and completely disrupt than others. Whereas a giant like Amazon was able to identify a basic need for a simplified, customer-oriented e-commerce experience (and thus completely transform the world of retail from bricks to clicks), the technological transformation of the insurance industry is a more gradual evolution. But it is happening, and incumbent carriers that don’t respond to the new demands of consumers will quickly find themselves being left behind.
As the Capgemini report wisely observes, insurtech firms’ key strengths lie in their nimbleness and ability to quickly address customers’ evolving needs. However, these firms face challenges that hamper their ability to scale up. Thus, collaboration with established insurers is necessary. The blending of insurtech’s agility and the experience and infrastructure of established carriers represents a best-of-both-worlds scenario that benefits everyone—carriers, insurtech startups and end users alike.
As noted by the Capgemini report, “For insurers to build strong competitive positioning and early-mover advantage in a dynamic market, it will be important to identify partnerships at different stages and to prepare for a future of collaboration.” For today’s insurers, this requires a new understanding of the role of technology in their organizations when it comes to redefining the customer experience.
Understanding and Aligning Strengths
For so many insurance companies, the pressure to evolve to support today’s consumers revolves around new technology and new means of digital communication. In that regard, information technology (IT) and information systems (IS) is becoming less of a department for incumbent carriers and more a way of working that permeates the business.
Technology is moving faster and faster, and the volume, variety and velocity of changes will continue to escalate. When it comes to adopting new systems and means of communicating with customers, incumbents should ask themselves, “Is that core to my business?” Should incumbents build or borrow new technology? Ultimately, incumbent carriers must think not only about the initial investment to build such technology internally but also the continuing commitment to constant development and innovation. This is where the prospect of partnering with best-in-class insurtech firms with specialized capabilities becomes evident.
Carriers need to stop thinking about transactions and focus more on engagement and relationships. The disruption we’re seeing in this industry isn’t being driven by insurtech firms. The customers—and customers’ evolving expectations—represent the ultimate disrupter in this equation. We’re witnessing the evolution of customer service delivery up and down the value chain thanks to the new breed of digital-born consumers. “That’s the way we’ve always done it” is no longer acceptable.
The main threat incumbent carriers are facing today is to business as usual. The insurance industry can no longer hide in the relative safety of its own vertical when all brands today are being compared to service and experience delivery giants like Amazon, Netflix and others. Fortunately, the technology, automation and artificial intelligence needed to adapt to these new expectations exists within the growing array of insurtech enablers.
Change is hard, and people (and organizations) are naturally resistant to it. But you can’t build a new future on old technology. The era of disruption is upon the insurance industry. But fortunately for incumbent carriers, it’s also an era of collaboration.
Originally published in Digital Insurance.