Over the past months, I’ve been in conversations with multiple carriers, tech vendors, and InsurTechs. In the early days of COVID, it was all hands on deck to protect employees and to care for customers during the quarantine. While there is still work to do in those areas the conversation has shifted dramatically in the past month. The conversation now is how to accelerate digital transformation in preparation for the new normal.
Caution – Uncertainty Ahead
The road to the new normal is uncertain and will most likely be bumpy. Scenarios include a V-shaped recovery that takes place quickly. A U-shaped recovery that takes a bit longer. An L-shaped recovery in which recovery takes place over an extended period of time. Or a W-shaped recovery that cycles through multiple ups and downs over years.
Scenario Planning Required
Savvier insurers are running SWOT analyses against those scenarios, developing, and then stress testing strategic and operational plans against them. While many uncertainties exist there is one conclusion all of them have come to. They have to double down on becoming a fully digital insurer.
COVID’s Digital Acceleration Mandate
Regardless of which recovery scenario unfolds access to capital, paper-based business processes, and multiple customer and industry segments will be negatively affected. Further remote working and cautionary social distancing will likely become the norm for many insurers and their customers. That means regardless of the recovery scenario, getting fully digital throughout the insurance value chain is requisite to brand, employee retention, and financial survival.
Their first priority is digitizing everything. This includes anything associated with customer engagement and support, risk analysis and underwriting, claims and fraud detection, and policy renewals and management. Improving speed, accuracy, and reducing costs is paramount. They are actively looking for solutions that can be implemented quickly.
Those include solutions that leverage, Big Data, AI & Machine Learning, and Robotic Process Automation. The majority of those implementations will be cloud-based and increasingly will leverage API and Microservices as a Service Platforms. These solutions give them the needed flexibility to accommodate different business and technical needs as the true recovery scenario unfolds and the true new normal becomes clear.
The Insurance Industry of the Future
There is another discussion that is also taking shape. And its that discussion that will truly shape the insurance industry of the future. That discussion is about true innovation. The conversation includes which business and product lines will take the biggest hit and where are opportunities to drive growth with new product and business models.
The focus is on developing product and business models that will relevant and valuable in the new digital normal that is coming. A new digital normal that is being driven by customers, industries, and governments that have all recognized the same thing insurance has. To thrive, to stay protected from a health and a financial standpoint, they must embrace a far more digital way of living, working, and creating value in the world.
Focused Innovation Wins
So where are the innovators focused? In the short term, they are focused on On-Demand and usage-based insurance in the personal lines space for things like auto and travel.
In the medium term, they are looking at insurance that addresses business operational models that include limited physical contact, remote work, social distancing, and limited travel.
In the longer term, they are looking at offerings that address risks to supply chains, business continuity, etc that include pandemics, climate change, social unrest, and changing trade policies. Some of the more advanced are investigating products that can accelerate the recovery both from a health and an economic perspective.
First Movers
The innovation ignition points will come first from InsurTechs who pivot to address opportunities investors see as delivering a higher return in the New Normal. Next from a new digital generation of MGAs and companies offering non-admitted policy types that seek to quickly fill gaps in exiting coverages or to address emerging risks. Innovation will also come from the big tech players seeking to capitalize quickly on fundamental social and economic change.
Carriers who moved early to embrace digital and whose cloud-based infrastructure will capitalize on the business agility they now have to quickly address fast-changing requirements and customer expectations as well as emerging growth opportunities.
Fast-moving businesses from other industries will move to embed insurance into products or services to deliver a more holistic value proposition that is in line with the social and business norms of the new normal.
Roadmap to Success in the New Normal
Insurers that intend to capitalize on the new normal will need to do several things. Double down on becoming a fully digital insurer. That means:
Getting to the cloud, embracing cloud-native core systems and microservices, and API platforms as a service as quickly as they can.
Assessing how different shaped recovery scenarios will impact their financial health and their existing product and business lines and adjusting their appetite and operations. Determining and make the changes needed to ensure those remain relevant and profitable in the new normal.
At the same time, they need to monitor, partner, and invest in the more nimble InsurTechs, MGA’s, and Non-admitted companies that are identifying and filling the gaps in existing product lines and building new products that will drive growth and profit in the new normal.
The majority of these fast movers will be tapping into the digital ecosystems surrounding insureds and capitalizing on the platforms, solutions, and data within them to create holistic offerings that help predict, prevent, mitigate, and recovering from risks easier, faster, and less expensive.
A Digital Imperative
Companies that can’t or won’t undertake the above will find themselves drowning in the digital dust of their more digitally astute competitors. The net? COVID has accelerated the digital tipping point for the industry. And, that’s why accelerating the push to become a digital insurer is no longer something nice to have in the future, it’s now a mandate for every company that expects to be standing 3 – 4 years from now.
Your thoughts appreciated.
Mike Connor
