Digital Transformation

Ten years ago, when nobody had a smartphone in his or her pocket and analytics was a buzzword only among math PhDs, the insurance business model did not seem like it was on the verge of transformation.

The thought of having a computer helping to safely drive a car – or a car, in fact, being a computer – was more Star Trek than reality. And if someone forgot to turn on his or her home alarm system or turn down the heat before leaving for vacation, there was little way to protect property aside from tracking down a neighbour with a key.

Fast forward to 2015, and digital has turned property and casualty insurance on its head. There are now connected cars featuring telematics devices, and home safety and alarm systems that can run homes remotely from phones. There is a vast array of insurance options for consumers, with new solutions coming online all the time.

COMPETING IN A NEW ERA

Around the world, traditional insurers are finding that the rising tide of digital is buoying new competitors that no one considered – or perhaps imagined – a decade ago. Aggregators, banks and even grocery stores are selling insurance.

For example, Google now has a licence to sell insurance in most states south of the border and potentially understands a policyholder far more than any other provider ever could – considering people do not ask their insurance providers about every random symptom they experience, but do ask their search engines.

The call to action for Canadian insurers is loud and clear: harness digital to disrupt competitors, or be disrupted.

But with so many years in a stable business model that required little in the way of broad-based technological innovation, insurers often have what some might gently refer to as “legacy” computer systems. Canadian insurers are now responding to this challenge and, as a result, a digital renaissance of sorts has emerged in the industry.

Successful digital insurers today should be cloud-based, and they must fully embrace analytics software and capabilities, as well as components such as sensors in homes and geo-tracking in cars.

Digital is even changing the sales model: instead of picking up the phone to inquire about a policy, there are now connected places where insurance can be sold, such as connected cars.

The insurers that embrace digital transformation today will be able to maintain a competitive advantage, and use their enhanced digital capabilities to create new and relevant products.

But how? For several years, carriers have worked to optimize their operations at the dawn of the digital era, but they need to start focusing on what comes next.

TECHNOLOGICAL TRENDS

Accenture’s Technology Vision for Insurance 2015 – Digital Insurance Era: Stretch Your Boundaries, based on input received from 200 insurance executives worldwide – identified the technological trends expected to have the most impact on insurers in the next three to five years. These are as follows:

1. Internet of me

The time is now to put the consumer at the centre of everything, because this is going to decide how an insurer plans to do business. As components increasingly become intelligent devices, insurers have an opportunity to embed themselves into connected devices to become a more relevant part of people’s lives.

Of course, entering into this space opens up the doors for outside industries to play, such as technology companies. If insurers do not start to put the customer experience at the centre of all they do, someone else will. Some carriers are already providing value-added services, including roadside assistance or automatic accident detection to their offerings.

The key is to ensure that trust, security, privacy and transparency are maintained with every interaction. Determine what can be offered in return for increased personal data – e.g., if a customer shares his or her driving data with a company, the company will provide free or discounted roadside assistance.

2. Outcome economy: shift from selling things to selling outcomes

This step sounds simple, but it is harder than one might think. It is an old industry chestnut that insurance is sold not bought, and focusing on outcomes is how to achieve this.

As insurers begin selling solutions and results rather than products, carriers today appear to be taking a two-pronged approach: addressing short-term needs by improving internal processes, while investing in digital transformation to help prepare for the future.

Insurers are in a unique position to mitigate the risks of new technology. They can innovate while taking on the responsibility of governing the dangers of disruptive new technologies, putting the end-user at the centre of every digital experience.

For example, State Farm, the largest home insurer in the United States, has announced partnerships with home security companies ADT and Lowe’s to install smart home-monitoring systems for policyholders. Here, it is not just about selling policies, but also helping customers to enjoy the outcome of living in smarter, safer homes.

3. Platform revolution

Digital platforms are the tools of choice for delivering outcomes to consumers. Cloud-based solutions, analytics, hardware sensors and other digital technologies are providing insurers with the insights to provide a better, more personalized customer experience.

For example, Microsoft and American Family Insurance, the third-largest mutual U.S. property and casualty insurer, have partnered to launch a business accelerator for start-ups focused on home automation. The aim is to nurture advances that can help lead to safer and smarter homes.

The insurer will provide its industry experience, consumer insights and homeowner knowledge to help the start-ups to succeed and, in return, will get access to cutting-edge connected home technology.

4. The intelligent enterprise

Becoming a digital insurer means embedding software intelligence into every aspect of business, and platform-based ecosystems represent a new plane of competition. For example, one leading insurer recently announced that it will provide new policyholders with a free fitness band to track their health progress – and then reward their healthy living with a reduction in life insurance premiums.

Insurers are also leveraging start-ups and innovation labs to explore and use the new technologies available to them.

The big question is, does a company build its own ecosystem or tap into an existing one? For example, does it make sense to build a travel app or partner with a popular aggregator to leverage its existing app to sell travel insurance?

Taking it one step further, insurers can leverage the geo-positioning on consumers’ smartphones to make relevant promotional offers, such as offering short-term accident insurance to a customer pulling into the parking lot of a ski lodge.

Insurers can also use big data to enable intelligent systems to make better decisions. Mass access to these innovations is being driven by some key factors, including the decrease in cost of storage, the proliferation of cloud-based technologies and the major advances in data science.

5. Workforce re-imagined

This trend has to do with the intersection of humans and machines: that is, wearable technologies and smart machines acting as members of a broader team. This goes far beyond the commonly used, “no ladders up roofs” example, and into compelling new areas such as using drones to assess home damage at disaster sites.

Claims field adjusters could use wearable cameras to augment their ability to evaluate damage by recording all of the information needed to evaluate the claim. To do this well, insurers need to be thinking of their workforce in terms of human-machine collaboration.

There are great opportunities ahead for insurers with the emergence of digital, and Canadian carriers that take steps today to address these trends will emerge as the winners in an increasingly complex market,
and move from having a digital consumer strategy to an overall business strategy that is digital.