There’s no doubt that the insurance sector is currently under pressure. From the impact of the pandemic to the changing expectations of consumers there are many different factors that insurers need to bear in mind when it comes to future strategy and growth. These are 10 ways insurers can adapt their business models in order to respond to this.
- Integrate analytics-driven underwriting. Digital data provides a practical alternative to in-person visits for many insurers today. For example, the data required for life insurance could be drawn from medical records and other sources, rather than generating the need for a physical exam. Property insurers can use the wealth of data being generated by owners, from photos to drone footage.
- Provide risk mitigation options. In addition to simply insuring against the outcome of a risk becoming real, insurers can evolve services to also provide risk mitigation, such as supporting customers in more effectively protecting their IT environment or guarding against certain types of physical damage.
- Create new products and services on the basis of existing customer data. Incentives, such as discounts on premiums, are a simple way to encourage customers to share data that can be used as the basis for new products and services going forward.
- Work with government to develop new products in response to recent events. For example, there is a great deal of scope to do this in the light of the recent pandemic.
- Create more affordable insurance based products to make the business model more competitive. Technology such as telematics can be incredibly useful here, as it allows for products to be designed based on usage and these tend to be easier to price at a lower rate. So, car insurance can be based on the actual number of car trips taken, for example.
- Expand into insurtech. One of the simplest ways to do this is to collaborate with insurance tech start-ups, whether that’s via partnerships, investment or joint ventures. Insurtechs can also help traditional insurers to bring new products to market much more quickly.
- Increase the use of parametric products. This simplifies the time and resources involved in a claim by paying out automatically under certain conditions. Instead of an investigation being required, the more straightforward claims can be instantly handled using parametric products and technology such as blockchain.
- Focus on new revenue opportunities. For example, insuring online retailers against losses when customers return broken items is something that is already common practice in locations in Asia and increasingly in demand in the UK.
- Expand the business model. For example, some insurers now view themselves as technology providers and data companies and not just insurance businesses.
- Look into underserved markets. These are often markets where there is a need for low priced insurance that it just hasn’t previously been possible to deliver. Now, however, new technology such as Artificial Intelligence, blockchain and analytics are helping to create more innovative, cost effective solutions.
Evolution is essential for the insurance industry today and these are just some of the options open to insurers to do just that.