Time for disruption: Why the insurance industry needs to play catch up with the digital age
by Heat Recruitment
by Esther Alley
It is widely acknowledged that the insurance sector has fallen behind related industries such as banking and finance in adopting digital technology. There are exceptions, of course, but overall, insurance is behind the times and needs to get to grips with digital urgently or else face serious consequences. So how has the industry fallen behind?
Well, one reason is that the operating environment has been so challenging in recent years that the sector’s energies have all been focused elsewhere.
There is a whole list of challenges (or excuses): the bleak economic scene, the eurozone crisis, the uncertainties of Brexit, changing legislation, and increasing competition. It can be argued there’s just too much going on to think about the massive changes that digital would involve.
What’s more, the sheer pace of technological advance makes it hard to know where to begin. But digital isn’t going away, and the insurance sector has already fallen behind. Here are some compelling reasons for it to catch up now:
- Do it or die!
That’s a pretty scary way to start, but digital offers new ways to approach insurance, and if incumbent companies don’t seize them, others will – either tech-savvy start-ups or those in other sectors. As an example, an Accenture paper in 2013 highlights how telematics could transform car insurance. If the insurance industry doesn’t embrace this, the auto industry and telecoms sectors will be happy to muscle in.
- New opportunities
If survival isn’t a big enough motivator, how about the excitement of the new? The sector is going to be disrupted by digital technology – better to be doing the disrupting than to become a victim of it. Consumers have increasingly powerful tech at their fingertips, and their attitudes as customers have shifted too. Digital offers insurers an opportunity to revolutionise their business model and completely rethink the way they work, both strategically and operationally.
- Facing the task
We have seen how criminals can use technology to shut down computer systems in hospitals, businesses, and public agencies. With the growth of the Internet of Things, smart cities, and the general increasing ‘connectedness’ of society, there will be new opportunities for disruption and damage from these cyber criminals.
Embracing digital and being sufficiently agile to adjust and readjust their business models and working practices will be the only way insurers can hope to keep pace with what futurist Matthew Griffin describes as “the enormous number of new variables and threats that the interconnected, technology dominated world creates”.
- Become the best
As digital technology transforms the insurance sector, so the characteristics which deliver success will change. The current leading insurance companies may become also-rans, as others emerge better suited to the new world of insurance.
That Accenture paper suggests three fronts which will characterise the high-performance digital insurer: Connected (reinventing the customer experience), Analytic (richer insights and smarter decisions to enable better outcomes) and Agile (staying one step ahead). The increasingly connected world, enabled by rapidly developing technology and changing consumer behaviour, brings huge challenges, but also opportunities for the insurance sector. Perhaps the only certainty is that insurers have to embrace digital if they are to survive and thrive.
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