Creative disruption in the insurance landscape - threats or opportunities?
Consumers expect their insurance companies to be reliable, analytical and well-organised. This perception has worked for the industry for decades, but the world is changing rapidly around it. Customers not only want trustworthy insurance providers, they want personalised coverage, instant service and online access. If they can’t get these from traditional insurers, they’ll turn to unexpected sources. So who will be there to pick up the slack?
Pressure from a changing market
As the the world races on, consumers expect insurance products to reflect their new environment (technology blog link). The digital age has brought us almost instantaneous access to everything we need. The desire to provide real-time responses to consumer demand is now a need.
In insurance, this requirement is not being met. Product development, for example, is yet to move at a modern pace. According to an Accenture poll of insurance providers, 40% say product development still takes 12 months or longer. By that time new risks may have developed, and an opportunity is gone.
The emergence of new players
As demands on insurance providers change, more agile companies will emerge as unexpected players in the insurance landscape. Early moves by tech giants such as Google and Amazon suggest that we could soon be buying insurance online. Google has already dipped its toe into the insurance waters, providing price comparisons for insurance customers in the UK and US.
But how will customers respond? In 2014, 67% of insurance customers surveyed globally said they would consider buying insurance products from organisations other than insurers, such as Google or Amazon. It seems experience no longer outweighs innovation. Recent studies have also shown consumers already prefer to compare insurance online before going to buy in person. We're not far from cutting out the middleman and buying online without any human intervention whatsoever.
Similar changes in market structure can be seen at a more developed stage in other industries. The banking sector is facing a very real threat of being pushed out by non traditional providers. Google has a debit card, T-Mobile has a checking service and Walmart has teamed up with American Express to provide a prepaid debit card.
Of course, both traditional insurers and banks have distinct advantages over non-traditional market entrants. A wealth of knowledge built up over generations and almost unshakeable credibility are nothing to dismiss. The key to survival is leveraging these advantages into new innovations. Some good examples can be found among some of the world's largest banks, with many backing innovation centres or trying their hands at angel investing. Advances in internet banking and customer interaction are also worthwhile watching.
The change in market demand heralds the end of traditional insurance processes, and a wealth of opportunities for those who can learn to innovate. Insurance, an industry of methodical precision and planning, must keep up. The question every insurer should be asking themselves is how to increase agility without losing accuracy?