Eight Trends Insurers Need to Consider for 2018
The more things change, the more they…no, they don’t stay the same. Not now. Change is hitting the accelerator, and nearly every insurer – no matter their size, structure or particular circumstances – needs to be thinking about how they can keep pace and position themselves for the future.
In this edition of our Twelve Days of Digital Transformation blog series, I take a look ahead to what insurers need to be thinking about as they move into 2018.
1. Digital Transformation
Yes, digital transformation has become an overused buzzword beloved by everyone. Yes, it can mean different things to different companies.
But ultimately, it’s a process of using technology to radically change your business.
And along with that being a pretty bold idea, there is somewhat of a daunting task at the heart of digital transformation.
Because rather than focusing on any single IT project, digital transformation describes a series of projects that, together, change every facet of an organization, from back office operations to customer interactions, with the end goal of making these different processes intrinsically linked.
That’s hard. But, it is something that cannot be ignored, because there is:
2. New competition from everywhere
InsurTechs, Amazon, Google – it seems that everyone thinks they can get into the market and find a niche that they can capture profitably. Technology and the realization that there are untapped distribution channels have combined as the game-changer here, enabling outsiders to the industry to see openings to innovate.
Much like Uber and Lyft have put taxi companies on notice, insurers have realized that they need to take a fresh look at their business models and see if “the way we’ve always done things” is not the only way to do them.
And it is not just startups that are innovating:
3. Innovation labs are proliferating
Not to be outdone, many large, established companies have started innovation labs. State Farm and Nationwide are two examples, both looking at how things can be done differently, with the understanding that their market share can dwindle in a minute.
Unlike traditional operations at the home office, these teams operate independently and are given the latitude to be highly flexible. They are future-focused, understanding the need to evolve and adapt to insurers’ changing challenges and opportunities, constantly reviewing their performance and for effectiveness.
This autonomy has resulted in a new way of looking at the business of insurance – zeroing in on the critical business initiatives to in order to stay competitive.
The environments that the teams maintain truly mirror start-up company operations, with open floor plans and a flatter office hierarchy, meant to foster more collaboration and an open exchange of ideas.
Silos are being torn down, which leads to:
4. Analytics are not just for actuaries anymore
Data analytics will be more integrated into other areas of insurance. Numbers don’t lie, and insurers are realizing that machine learning can enable profitability in very practical ways.
Allstate’s subsidiary, Arity stands out here, as they are using analytics to help insurers make better decisions about the drivers – in real time.
So, they’re taking a step back to look at the industry with fresh eyes and thinking about:
5. The sharing economy
Carriers need to take a fresh look at exactly what will be insured in the years to come, and make plans to pivot so they can accommodate that.
New business models translate into new needs for insurers to consider. Consider how Uber and Lyft have changed the way that people use their vehicles.
Arity has been on the forefront of working with ride-share companies. The popularity – and use – of these has grown so rapidly, and insurers realize they need to respond in ways that will protect both them and their insureds.
But, without being able to predict what the next big thing will be, there is only one way for insurers to prepare themselves for the future, which translates to:
6. Driving growth through technology modernization
Modern means digital.
“The future of insurance will be digital. That much is certain.”— McKinsey & Company, A roadmap to digital transformation.
And to be digital, an insurer needs a digital platform.
The value proposition for digital technologies reaches into every part of the business. It enables insurers to link functional processes and applications to deploy digital capabilities across the business; first internally, and then externally, to drive richer consumer and agent experiences.
The reality is insurers are realizing the potential to generate value by embedding digital capabilities deeply and directly into their business models.
But there are other technologies in the mix, like:
7. Artificial Intelligence, Robotic Process Automation and Machine Learning
As insurers look to adopt Artificial Intelligence (AI), Robotic Process Automation (RPA), and Machine Learning, seeking to get the most value from these disruptive technologies, they need to have a clear picture of how they work together to deliver value.
AI is the capability of a machine to imitate intelligent human behavior; in simple terms, the ability of a computer program or a machine to think and learn. RPA is the use of software with AI and machine learning capabilities to handle high-volume, repeatable tasks that previously required a human to perform.
Insurers are using these to drive significant efficiencies in claims, call centers and other areas. And further:
“Connecting digital with robotics addresses some of the largest inefficiencies in current processes.”— EY, Impact of Robotics, RPA and AI on the insurance industry: challenges and opportunities
Ultimately, what needs to be acknowledged is that:
8. Insurance Distribution is being disrupted
And it will continue to be. Forward thinking insurers understand that they need to put themselves on a holistic path to the path to digital transformation. The path includes technology and process.
It also includes a shift in mindset. It is no longer about a project plan and an endgame. The target will continue to move – to be disrupted – and insurers need to be ready to change, and then change again.
It’s a marathon, not a sprint – but each sprint matters – and will have a positive impact on insurer business operations. Appian is ready to work with insurers to make 2018 the year where digital everywhere becomes a reality.