Autonomous cars might mean fewer accidents, translating into lower premiums | Source: Pixabay

Tech to help insurers pocket an additional $375b in revenues

ANALYSTS studying technology and its impact on the world are seeing a new trend emerge in the insurance industry that opens up doors to new revenues.

According to a report by Accenture, insurance carriers globally could seize US$375 billion in new revenues over the next five years by transforming and revitalizing their business to stay up to date with digital innovations.

The largest of these new revenue growth opportunities will arise in the Asia Pacific, followed by in North America, and Europe.

The consulting giant believes that insurers that continuously innovate and adapt to changing customer needs will be able to capture emerging growth opportunities and outperform competitors.

According to their report, Insurance as a Living Business, insurers that possess an unwaveringly customer-centric and adopt fluid models and flexible platforms and talent, understand their customers, and adapt and innovate constantly – at speed and scale – to remain hyper-relevant, are living businesses and will survive.

Keep it old school, and risk being left behind. Source: Shutterstock

Diving into the US$375 billion opportunity

Increased penetration of difficult-to-reach segments
Estimated Value: US$144 billion

Traditional methods allow insurers to only reach a certain number of audiences in certain parts of the country or world. Setting up operations to serve more people means more costs.

However, in the new age environment, insurers can leverage new channels such as online and mobile, and use new technologies such as analytics and geo-location to enhance insurers’ effectiveness.

Examples of new models they can use include direct to consumer, micro-insurance, middle-market life insurance, worksite insurance, and robo-advisory advice.

Companies that have the early advantage adopting a direct to consumer model, for example, include MassMutual and its online subsidiary Haven Life in the US, Direct Line in the UK, and Lifenet in Japan, and all of them have been considerably successful so far.

New risks as a result of innovation
Estimated value: US$111 billion

Innovations are disruptive but they also create opportunities. To make the most of those opportunities, insurers can find new avenues to offer protection for.

Some of the new opportunities for insurers are cyber insurance, protection against increased longevity risk, insurance for digital and personal assets, and protection to the sharing economy and the gig economy.

Examples of firms exploring this angle include the Farmers Insurance Group who has launched a ridesharing-specific endorsement to its personal auto policy in Colorado and Allstate who has introduced HostAdvantage for home sharers and Ride for Hire for ride-hailing drivers.

Relationships with ecosystems and intermediaries
Estimated value: US$80 billion

Google, Apple, Facebook, and Amazon (GAFA), and similar ecosystems and partners can help insurers scale their business in new and exciting ways to create additional value for customers.

Imagine the value an insurer can create for a life insurance customer if they’re able to tap into their fitness records through a fitness band and understand their exact needs?

Some of the new ecosystems and intermediaries insurers can build relationships with include insurtech firms, payroll companies, car manufacturers, and wellness brands. Existing partnerships in this area include AXA and Alibaba, Munich Re and Trōv, and State Farm and Openbay.

Monetization of the new
Estimated value: US$28 billion

Insurers can explore how offering their assets to ecosystem partners and other players can benefit everyone.

These assets include data and customer insights, platforms and models as services, risk algorithms, digital identity verification and more.

Their initiative can help provide data-driven services, create healthy living options, and sell proprietary algorithms.

In practice, Wellth, a patient management service is working on this. It applies behavioral economics through scalable technology to improve personal treatment-plan adherence, engagement, and health.

Value-added services
Estimated value: US$12 billion

Insurers could leverage technology to create products and services that help customers reduce their risks.

Often enabled by the Internet of Things, these personalized services will allow insurers to position themselves more positively, increase the frequency and value of their customer engagement, and generate revenue at the same time as lowering the incidence of claims.

A few examples of what insurers can do are: use wearables to help aging relatives stay at home longer, sell connected-home devices & home security services, and offer advice about what car to buy.

Technology startup Arity, for example, has already partnered with Allstate to use its driving data and modeling expertise to help consumers evaluate their driving risk in real time and make smarter decisions.