By Uwe Hofstaetter, Solution Manager-Insurance, SAP
The evolution of insurance has begun. The sweeping competitive disruptions that have hit the industry have a lot of momentum behind them from technological advances, changing customer expectations, and new players entering the insurance market.
Insurers see the writing on the wall. According to a recent study, 75% of insurance companies believe that the lines between insurance and other industries are going to become increasingly blurry due to the Internet of Things (IoT) and other factors.
On one hand, this is an exciting time to be in insurance. There are many possibilities for expanding the insurance market into new territories. On the other hand, legacy insurance companies may struggle to be nimble enough to appeal to evolving customer demands, leaving them vulnerable to losing market share to new players.
To stay competitive, established insurers are going to need to adopt a mindset that insurance is no longer a siloed industry, nor one that’s likely to remain static for long.
Selling outcomes and experiences
Meeting with an insurance agent, waiting for a quote, and then paying out a large amount of cash for a commodity insurance policy is becoming an antiquated concept. Today’s customers are interested in the total insurance experience, rather than just the product.
Think about it: Consumers are becoming increasingly used to personalized and self-service shopping experiences. Companies such as Amazon and music streaming services not only sell individuals exactly what they want, but they also suggest other offerings that might be appealing based on past activity.
That has created a mindset in which customers expect companies to “know” them or as we call them: The Game Changer – for details see: http://www.sap.com/InsuranceOfThings
Thanks to wearables and sensors, many people are also getting more comfortable sharing their personal data with companies. In 2015, there were approximately 14.8 billion sensors in use. By 2020, it’s estimated that there will be 200 billion connected devices in use. In return for providing all of that data, consumers are likely to expect more personalized, segmented offers. For example, usage-based insurance may appeal to people who use car-sharing services or have very low mileage. Customers may also expect lower insurance premiums for safe driving habits as recorded by their connected cars.
The IoT now also offers the ability to actually help reduce risk instead of just compensating for losses. We’ve already seen partnerships arise between large insurers and home security companies. Imagine the possibilities if those offerings went even further, and provided services in which someone would check on your home while you were out of town, for example.
White-label insurance offerings that are integrated with other purchases are also blurring the lines between insurers and neighboring industries. For instance, when booking a flight online, it’s possible to click a box to purchase travel insurance without even knowing who the carrier is.
Social media is also impacting insurance, as new products arise that allow individuals to pool risks with people they already know.
Established insurers can’t fall behind
Even so-called niche players that pioneer new offers and services are likely to have a major impact on how the big insurers conduct business. With each new offering, customers’ expectations will be raised even further, leading to offerings that we probably can’t even conceive of yet.
Failing to keep up may mean that large enterprises could eventually run into major roadblocks that threaten their survival.
Digital insurance solutions from SAP can help established insurers incorporate new offerings into their core insurance business platforms, or integrate offers from innovative partner companies. Either way, insurers will be able to realize more personalized services that engage customers and cater to their specific needs.