" Few insurers, however, are sufficiently prepared for the scale of the disruption that awaits them. Our research shows that the insurance industry has, so far, been one of the business sectors least affected by digital disruption. But, it ranks in the top quartile of sectors likely to be disrupted in the next few years. We calculate that the approaching shake-down could cost some carriers as much as 40 percent of their traditional risk-protection revenues. This could happen within five years."
Jean-Francois Gasc Managing Director Accenture Insurance 5 April 2018
This is backed up by detailed research published by McKinsey in 2017 summarised below - for full report follow link at bottom article
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 for home, travel, pet and commercial.
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. What is required is a combination of: -
- A digital platform from FNOL to settlement/close
- Omni-channel- Online button, via Call Centre, embedded in app
- Customer self-service to Amazon standard of UX
- Platform to include supplier integration
- And orchestration of all participants in settling a claim
- Backed by Claims Services that are as effective, fast, efficient and transparent as Airbnb
Without that insurers do face losing 40% of their traditional risk protection revenues. Combine that with the McKinsey research and there is only room for 4/5 profitable insurers in each product category geography.
Even if an insurer plans. implements and deploys steps 1 to 6 there is another disruptive factor they must address- they only access about 10% and just possibly 20% of the data in the organisation. They must access and analyse all 100% before getting diverted by external data important though they are.
Data & Analysis
- 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.
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.
Combined with a world class digital claims platform-orchestration hub, insurers will be on the road to avoid loosing 40% of risk-protection revenues and a large chunk of their profitability.
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.