Digitally transforming direct auto insurance a single player has captured up to 70% of profits in Spain, Germany & the US. There is no reason to believe it will not be the same elsewhere and in other industries.
This means not just increasing efficiency thereby reducing costs and improving profit margins. It means taking the bull by the horns and digitally transforming the whole show - all perils, all products and the complete value chain.
- from customer engagement
- through distribution and supply chain
- to developing new products for the new future
A future that is undermining traditional insurance business models: A future that should not be planned using past and present perspectives.
- Connected customers, vehicles, property, pets and sensors
- Autonomous vehicles
- Preventative risk products & services
- Changing lifestyles and behaviour
McKinsey identifies three key drivers forcing change and this benefits the first movers who will triumph over laggards.
- Risk Prevention
- Data & Analysis
- Institutional Investors
Data & Analysis is the biggest disrupter- it is the potential to access and analyse all data:-
- Internal & External
- Structured- easy
- Semi-structured- more of a challenge
- Unstructured- largely ignored but vital for a complete picture of customers, risk and predicted outcomes
The winners of digital transformation will be those that can transform uncorrelated data from all those sources above to correlated data.
Correlated data is achieved when context is added to the insights gained from uncorrelated data. The more this achieved the more valuable the data. The equivalent of compound interest in the analogue world of capital.
"Correlating uncorrelated data, by adding context, is the compounding interest of the information age".
Christopher Surdak 2016 "Jerk Twelve steps to rule the world.
Yet today the traditional insurer can rarely analyse more than 20% of its own data never mind external data.
The tools are there to mine and analyse all this data and exploit it for far more than just increasing operational efficiencies. Get the complete insight of customers, events, context to gain the complete competitive advantage.
Instead, digital technology and the data and analysis it makes available give insurers the chance to know their customers better. That means they can price and underwrite more accurately, and better identify fraudulent claims. They can also offer clients more tailored products—auto insurance that charges by the mile driven, for example. And they can offer them in a more timely manner. In an analog world, an insurer will be unaware when a customer holding a home insurance policy puts that home on the market. In a data-rich digital world, that need not be the case, and the knowledge that a home is up for sale becomes an opportunity to offer new home cover, new auto cover, and perhaps a life product to help cover a mortgage on the new house.