The two trends that point to the future of the insurance sector

by Jeffery Williams, senior analyst, Forrester Reports

The rapid advancement of digital technology is ushering in new ways to sell, buy and administer insurance and service customers. And new entrants, with their nimble, digital-first operating models, are challenging the status quo. In the next five to ten years, two themes will emerge that will shape the insurance marketplace.

Insurers will focus on personalisation

Digitally empowered customers are seeking better, more personalised experiences. Nevertheless, product-oriented strategies handicap most insurers. Today, customers want confidence and security, yet insurers sell them loss-recovery contracts. To stay relevant, insurers will need to become solutions providers that offer value-added services that wrap around the underwritten coverage. This will involve:

Providing personalised advice on reducing risks. The insurers of tomorrow will provide their customers with personalised assessments of, and advice on, risk. Auto insurers such as Allstate and Progressive offer programmes that allow customers to monitor driving habits and tendencies and that track driving speed, mileage and driving time. Life insurers such as Great Eastern Life help customers understand their health and give customers relevant tips, discounts and incentives to bring them closer to their specific health goals. But it’s not just about incumbents. Insurtechs are bringing innovation too. For example, Life.io offers a platform that rewards customers for learning how to improve their well-being.

Offering personalised coverage that is dynamically priced. The future of insurance will be increasingly personalised and customisable, rather than one-size-fits-all. Established insurers such as Allianz, AXA and Liberty Mutual, as well as new entrants such as Clearcover, Metromile, and Root Insurance, use telematics devices to monitor driver behaviours and price premiums accordingly. Insurance policies will eventually mould themselves around a customer, becoming living contracts, with contextual advice and add-ons to reflect customers’ changing risk conditions.

Insurers will form new partnerships to create value and drive growth

Today, most insurance companies serve only one small slice of their customers’ overall ecosystems, inherently limiting their opportunity to identify and meet their end-to-end needs. Tomorrow’s insurers will pivot their strategy to a fundamentally outside-in, customer outcome-focused mindset as they envision insurance not as a set of products and services, but as part of a broader digital ecosystem. This shift will enable insurers to:

Leverage acquisitions or partnerships to encompass customer needs. Insurers should identify the most important ecosystems for their customers and ensure their company is part of these ecosystems. For example, MetLife recently acquired Willing, a leading digital estate planning service, which allows it to not only provide life and health insurance, but also the digital financial planning services many of its customers prefer. 

Use data insights to innovate and become more relevant. Insurers have traditionally worked

with third-party data providers that generate and stockpile data such as credit scores and vehicle accident data, to understand and serve customers. The internet of things (IoT) will enable insurers to underwrite more effectively, and contextually sell dynamic insurance solutions. For example, American Family recently partnered with Neos to offer its customers a line of smart home products that can help identify problems in advance and connect customers with home service professionals that can make repairs.

The velocity of change in insurance is only going to increase. New technologies and new competitors will fuel innovations that will touch customers, employees, and partners and make a difference to insurance business models. Insurers need to scan relentlessly for the innovations and ecosystem partnerships that can create better customer experiences, increase efficiency, reduce costs, and drive business growth. 

© Business Reporter 2020