The year is 1959. Neuroscientist and psychologist, Bela Julesz tests the ability of the brain to perceive images in 3D. Using circular dots and a double-image, subjects could begin to see a circle floating above a printed background. Fast forward twenty years and two of Julesz’s students use a computer to accomplish the same feat in just a single image. By 1991, Magic Eye pictures, created by Tom Baccei, Cheri Smith and Bob Salitsky, used repeat patterns to control the depth of perception. They could hide a complete 3D image inside a 2D pattern. The only way someone could see the image was to relax the eye, blur the pattern and let their brain do the rest. What looked out of focus, blurry and flat, was transformed into an image of stark clarity that leapt off of the paper.[i]
Is this a magic formula for considering today’s insurance? A jumble of patterns exist. Focus is difficult to maintain. Thousands of details and past assumptions threaten to distort what insurance executives need to decipher. But…if we relax just a bit and allow the blurriness to exist for a few moments, a certain clarity arises. Not only does the picture become clear, it jumps off the page in 3D. As market boundaries blur and evaporate, new answers to insurance technology, processes and business models are coming to life.
Which boundaries are reshaping the industry?
Four years ago, Majesco published its first Future Trends report that examined a major shift unfolding due to the converging “tectonic plates” of people, technology and market boundary changes disrupting and redefining the world, industries and businesses — including insurance. Two weeks ago, we released the 2019 report, Future Trends: Looking Back and Leaping Forward, where we once again discussed shifting market boundaries under six trending categories:
- Blurring Boundaries (between industries)
- New Competition
- New Products
- Competition for Talent
From the start, we recognized that insurers were going to begin competing in a new paradigm beyond their brand, product, price and distribution. This new paradigm required insurers to compete also on the customer experience using innovative approaches and value creation by transitioning from vertical market boundaries to porous market boundaries – or ecosystems.
Ecosystems are fluid, porous and operate across and within verticals and multiple channels. The first platform companies like Amazon, Google, Apple, Netflix, and Uber disrupted multiple industry verticals and demonstrated why market boundaries limit revenue generation, customer value, and market valuations. By bursting the boundaries, they lost predictability, but they gained new market reach.
The boundary lesson for insurers is that the industry isn’t simply being reshaped, it is being “unshaped.”
It’s no wonder then, that many insurers are finding themselves and their strategies are now adrift — no longer safely anchored to traditional assumptions. Insurers now have to wrap their heads around something new — a new image that will allow them to escape 2D frameworks and find answers in new dimensions.
Can we find clarity among the blurriness of market boundaries?
With traditional market and product assumptions (and constraints) evaporating before our eyes, clarity for the future has to be found in a whole new definition of insurance products and services. From ecosystems to technologies, some picture has to emerge that will allow our brains to think “outside the page” and leap to new visions of the future.
If we were to place this image into words it might be, “Escape linear thinking. Embrace the idea of plug and play, partners, networks and ecosystems.”
What is impacting our boundaries and how can we use an ecosystem approach to take advantage of these boundary shifts? We can find out by considering four of the boundary-breaking areas — InsurTech, Channels, Blurring Boundaries and New Products.
If you have been keeping an eye on InsurTech, then you’ll know how volatile and substantial InsurTech investment has been. Based on Venture Scanner data, InsurTech investment in 2015 was $1.78 billion as compared to $3.371 billion in 2018 (89% growth) and just over $5 billion through Q3 2019.
Even more interesting are the top funding areas. From the recent Venture Scanner report, Q3 2019 showed the largest influx of funding was in the Insurance Infrastructure/Backend category, with $1.12 billion.[ii]
This is a major flip given that channels / front-end were originally the top priority. This flip in focus recognizes the criticality of next-gen technology platforms for insurers that provide flexibility, agility, speed and scale. What does this mean for insurers who are looking for clarity?
First, insurers can take advantage of InsurTech investments without making direct investments in InsurTech. This is the one of the major takeaways from InsurTech trends. InsurTech capabilities are now ready as plug and play, ecosystem-based, cloud-available services such as Majesco’s Digital1st InsuranceTM is the cutting-edge application of core system and InsurTech technologies for front end, back-end, data and partner use — all within one platform. It is an excellent example of clear answers rising above the background of disruption.
Today’s customers have introduced new time requirements and pressures into the insurance equation because they are looking for solutions that meet their needs on their terms (when and how they need it), and with speed. There is the time to quote, time to underwrite, and time to purchase, which are all opportunities to lose or to gain the sale.
In this new era of insurance, nearly every insurance process is rapidly becoming frictionless, including buying. If distribution channels are easy to use with products that are easy to understand, then insurance has the opportunity to grow through a friction-free, multi-channel distribution system.
The industry is now exploding with new concepts in distribution, including new distribution channel options from marketplaces like Bold Penguin and digital MGAs like Slice Labs. We have also seen the shift from portals to digital experience platforms like Majesco Digital1st InsuranceTM, which has allowed companies like Burns & Wilcox, a major wholesaler, to bring innovative specialty insurance solutions to brokers and agents and speed and scale. Ecosystems can rewrite channel strategy and open the windows to allow for unprecedented levels of channel partnership.
Blurring Boundaries (between industries)
Embedded insurance is an example of boundaries becoming invisible. It is a “hidden channel”, connecting insurance with another ecosystem, such as rental properties, auto manufacturers or even baby gift registries – and embedding the opportunity to purchase within the existing process.
To capture the opportunity, insurers must create an ecosystem of partnerships with a range of digital capabilities and channels to reach new and existing customers. How do insurers recognize the opportunities that exist within the flow of the current of buyer needs, events and lifestyles, in order to fit the product to the flow of life instead of trying to sell “upstream”?
Majesco Consumer and SMB research has found that customers are very interested in innovative channels like embedding insurance. The answer boils down to alignment. Clear strategies will align the right channels, technologies, and partnerships, considering the synergies of partner organizations and the expectations of today’s and tomorrow’s customers. In many cases, insurers will need to quickly build relationships and cross industry verticals. In most cases, strategic clarity will be found through rapid test and learn cycles.
Over the last 4 years, we have seen a growing proliferation of new products and value-added services. These products use new data sources, offer new customer experiences, leverage new technologies and most importantly, they are focused on meeting a new set of risk needs and expectations, particularly for Millennials and Gen Z.
The most impactful change, driven by new startups and greenfields, is the unbundling of “one-size-fits-all” insurance into products based on specific needs at specific times. Unbundling, coupled with the growth in the sharing and Gig economy has powered the development of new micro-insurance or on-demand products across all insurance segments and lines of business.
Initially, unbundling was best accomplished by a range of small and agile insurance or MGA startups. As traditional insurers and reinsurers have begun to re-envision their responses to blurring industry and market boundaries, they have begun forming clear approaches to on-demand product development. Fast forward to today and we are now seeing the emergence of on-demand voluntary benefits, life insurance, rideshare, cyber and so much more.
These four boundary-breaking trends are proving that insurers of all sizes can now find an alternate picture within a blurring universe — clear answers rising above the background of tradition and disruption. In our next blog, we’ll look specifically at technology’s role in future-focused digital transformation. To gain a deeper understanding of more trends that are impacting the future of insurance, be sure to read Future Trends: Looking Back and Leaping Forward today.
[ii] “Insurtech Funding: Growth Trend Confirmed for Q3 2019,” InsurTech News, October 23, 2019, https://insurtechnews.com/insights/insurtech-funding-growth-trend-confirmed-for-q3-2019