Insurance companies and innovation don't often seem to go hand-in-hand, but as customer expectations rise, the industry must make changes.
Along with other barriers to entry, the complexity of the insurance industry has long discouraged new entrants to the market. This has essentially protected insurance companies from new types of competitors.
However, the outlook for the insurance industry has insurers nervous. New competitors from other industries are emerging as disruptive threats to established players and ways of doing business.
How can the insurance industry manage this challenge? How can insurance companies adapt to an increasingly competitive market?
Insurance industry outlook: Growing cross-industry competition
The insurance industry is undergoing so much change in the digital age, forcing insurers to change their ways in order to remain relevant. The emergence of cross-industry competition adds to the pressure for insurance companies to innovate and evolve.
What do experts say about the insurance industry outlook of increased competition?
- New competitors come in all sizes and shapes, from big technology companies to local opticians
- Established insurance companies must shift from a product to a service mindset in order to adapt
- Insurers must prioritize customer experience and understand what customers need
Industry Experts on the New Competition
A panel of insurance industry thought leaders convened to discuss the industry outlook and emergence of new competitors. You can watch a replay HERE.
New competitors from all sides
Originally, insurers were concerned about data-rich dominators like Google and Facebook entering the market. As it turns out, though, it’s other players entirely who are poised to disrupt.
Roland Bloesch, SAP’s Global VP for Regulated Industries who’s based in Switzerland, says that ecosystems are emerging beyond the traditional walls of the insurance industry to challenge the primacy of the long-established players.
As an example, Bloesch points to his recent experience of buying a new car and trying to get it insured.
Surprisingly – or not, depending on your perspective – the process was manual, paper based, and borderline maddening. It involved multiple calls and emails with the insurance company followed by printing of hard copy documents, signing, and sending back via traditional mail.
“It was extremely antiquated,” Bloesch says.
By contrast, in a neighboring European country – one with a different set of regulations – the process is vastly different. There, the auto company essentially provides a seamless experience to the customer, whereby the car, the insurance and, if needed, the financing are all bundled together.
Not only is there no need for the customer to deal separately with an insurance company or a bank, but a customized driver portal offers insight about policy options and how to reduce rates.
In fact, cross-industry ecosystems that simplify the insurance process are cropping up in multiple forms. Apple, a leader in so many other areas of customer experience, now offers all-inclusive AppleCare options that provide extended warranties and technical support for all the devices a customer and their family own.
All of this falls into the realm of insurance coverage, but needless to say there are no insurance agents to be seen in an Apple Store (unless they are customers).
Smaller players also are getting into the insurance business. Bloesch says a group of ski resorts in Switzerland banded together to insure themselves in the event of pandemic-related closures. He’s also encountered a local optician who offered his customers eyeglass insurance.
Adapting to the new competitive outlook for the insurance industry
Can legacy insurance companies effectively adapt to this new competitive landscape? According to Peter Maas, Professor of Management at the University of St. Gallen, they can if they embrace the shift from insurance as a product to insurance as a service that meets specific customer needs.
What’s driving this shift is that today’s customers are infinitely more demanding and, Maas explains, “only willing to embrace a service like insurance if they find the value proposition compelling.”
Sven Roehl, founder of Toronto-based Cookhouse Labs, agrees it all starts with understanding customers and what they are looking for – an approach that’s very new for insurance companies.
Even when customers are strongly represented in an insurance company’s strategy, that rarely filters down to the operational level of the organization, according to Roehl.
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This is problematic, especially when you consider that the cross-industry value plays described above are successful precisely because the customer orientation is pulled through the entire ecosystem.
In short, disruption is based on unique customer insights that are effectively addressed through innovative use of technology.
What’s clear is that the insurance industry will not go back to the way it was. For insurance companies to maintain and grow market share, they will need to embrace a customer-first approach, one that is often best served by an ecosystem of players both within and beyond the traditional boundaries of the insurance industry.