This article is a free resource from the TechMeetups Guru Program where Alan Walker is participating as our Financial Services Guru to assist founders of startups and business leaders though practical workshops and mentoring. In this blog Alan shares his thoughts on the opportunities he sees for innovation in the Insurance industry.
Opportunities in Insurance
So where are the opportunities for new ideas and solutions for the Insurance industry?
Anyone wanting to make a material impact on the Insurance industry will need to be creative in one of four key areas:
- Helping to increasing revenues, by improving the focus on Customers
- Helping to improve Operations, by reducing cost and / or making them more efficient
- Creating new Products or improving old ones
- Making better use of Data throughout the organisation
Let’s look at each of these in turn.
Helping to increasing revenues, by improving the focus on Customers
Opportunities for improvement in the Customer space include:
- Customer experience: Improving customer experience means changing corporate processes to optimise every interaction a customer has with an organisation, and this is an area many insurers find difficult to fully grasp and control. This is because insurance companies tend to be “inward looking” and have functional silos with fragmented responsibilities. In an industry where there is little product differentiation and product innovations are swiftly copied, customer experience remains one of the few sources of sustainable competitive advantages.
- Customer insights: To optimise customer experience, insurers must systematically measure and understand what customers want, and provide a consistent service that will meet this demand. A company that has developed a deep understanding of consumers can tailor its marketing campaigns, sales techniques, and product offerings to suit specific consumer segments, or introduce new brands that appeal to a particular niche. Analytics will be at the heart of customer, product and risk innovation – so better analytics can drive greater revenues. And the regulators (in the UK at least) requires an insurer “to know your customer” – so this demand for increased understanding will not be going away.
Helping to improve Operations, by reducing cost and / or making them more efficient
- Cost reduction: High insurance penetration, price sensitive customers, and the global economic crisis have limited the ability of insurers to grow premiums and investment returns. The focus in the market in the last couple of years has therefore been towards underwriting performance, and cost-effective and efficient ways to acquire customers and manage claims. Opportunities in cost reductions can range from communications, through supplier management, to service delivery and claims management. Many of the mature insurers are struggling to see the next wave of cost reduction opportunities without a complete change in business – so innovative solutions are at a premium.
- Productivity improvements: By increasing the productivity and efficiencies of core processes such as underwriting, claims management and policy administration, insurers can significantly improve their profit margins. Insurers can also improve productivity by helping workers to sell and service externally, and communicate internally more efficiently and effectively. All of these areas are, therefore, ripe for innovation.
Creating new Products or improving old ones
- New products: A continued focus on operational excellence, while important, will eventually lead to diminishing results for insurers as essential systems needed to run and optimise insurance business become commoditised. The next frontier, therefore, will lie in innovating and differentiating on products and propositions based on a complete understanding of customers and quickly identifying winners and losers (akin to the FMCG and Pharmaceuticals industries). There is therefore potential for new digital insurance products, including products leveraging mobile (smart phones, tablets etc).
- New platforms: The high adoption rate of mobile devices and Web 2.0 tools – such as social media, collaboration applications, smart phones and tablet computers – is changing the way people share information, learn, communicate, and interact. Insurance organisations therefore have the potential to interact and engage with customers via new media in addition to the traditional face to face and call centre platforms, opening up new opportunities for suppliers to the industry.
Making better use of Data throughout the organisation
At the end of the day, insurers are in the business of gathering and analysing data to appraise risk. This is what they do. And in 2009, more digital information was produced than all information since the beginning of time.
So how are insurers adapting to embrace and exploit all the ”new” data that exists, identifying the useful nuggets within all the noise and operationalising it to make better decisions on what customers need and how risky are those needs to insure?
In a nutshell – not as well as they could be. For an insurer, there are now multiple layers of practical data management required – not just Insurance Risk data, such as actuarial, underwriting and pricing, but also:
- Financial: Forecasting, budget allocations, etc.
- Operational: Streamlining, supply chain related etc.
- Strategic: Organisational objectives, defining and refining new products and services etc.
- HR: Evaluating employee performance, allocating time and effort etc.
- Customers: Facilitating improved experience, targeting the right customers, defining marketing campaigns etc.
That’s a lot of data to gather, analyse and exploit to the insurer’s advantage whilst still excelling at its core insurance business. So a lot of opportunity for companies that can help them.
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Overall, then, there’s a lot going on in the insurance industry as a result of competitive and regulatory pressures, and the changing expectations of customers.
But there are also lots of opportunities for technology to help make things better – and for new propositions from start-ups to make a positive impact on an industry with deep pockets.
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