Insurance has been around for a long time … dating back to ancient times. It has been noted that the first written insurance policy appeared on a Babylonian obelisk monument with the code of King Hammurabi carved into it. The "Hammurabi Code", one of the first written laws, offered basic insurance for individuals if a personal catastrophe made it impossible to pay back a debt. Insurance continued to grow and evolve across centuries and continents. The Guilds in Europe supported master craftsman with a type of “group coverage” to subsidize them and their families upon injury, disability or death. Deals made in London coffee houses to cover maritime risks were the beginnings of the London Market. These efforts met a universal and timeless need to stabilize individuals and the economy against risk.
The evolution of insurance often followed emerging developments such as the agricultural revolution, the industrial revolution, and the information revolution. Each of these revolutions created and reshaped businesses, including insurance. Insurance evolved with each revolution to meet changing needs and to adapt to new developments or technologies that changed and shifted businesses, markets and risk. Each revolution required a re-thinking and re-alignment. It required business leaders to shed sacred notions and wake up to the possibilities of rebuilding on a new foundation while maintaining the old structure long enough to move out safely.
Erasing the notion of moderate change
Our industry is waking up and finding itself on a precipice in the midst of strong, seismic shifts. A new revolution is underway. The digital revolution. This revolution is different due to the complexity, breadth and depth of converging factors and global changes. To an industry steeped in centuries of tradition, this revolution is poised to create significant disruption. The digital revolution is shifting and realigning fundamental elements of business that require us to erase the idea that we can ease our organizations into the new era with minor adjustments.
Think of how the digital revolution is going to reinvent your business model. Insurers are moving from product driven to customer driven strategies; from limited distribution channels (such as agents) to an array of channels based on customer choice; from line of business silos to customer centricity and customer experience for all products across all lines; from simply containing risk to proactively providing personal risk management; and from siloed solutions focused on transactions to a platform portfolio that bridges together real-time interaction for all products and services for a customer, giving them an Amazon-like experience. Whew! It stretches our minds and our mindsets to consider it all at once.
The rebirth of real opportunity
These influencers of change are challenging traditional insurance models resulting in declining customers, loyalty and premiums. Whether it is the demand for mobile channels in addition to agents, or declining life insurance or personal auto and home insurance due to demographic changes, or declining premiums for products like auto insurance due to emergence of new technologies like crash avoidance, connected cars and autonomous vehicles, these influencers of change demand we not just transform insurance but rather have a rebirth, a re-imagination or a renaissance of insurance. The promise of the digital revolution, however, is that we can. Traditionally damaging business factors no longer have to be met with traditional business adjustments.
Instead of transforming the business using age-old assumptions and traditional business models, insurers must look to reinvent the business model, not unlike how Uber reinvented the taxi model. Increasingly, insurance CEO’s are speaking out about the coming disruption of insurance and the need for insurance to aggressively rethink the business model.
On May 27, 2015, Generali’s CEO, Mario Greco, commented in the Financial Times that insurers will disappear unless they embrace sweeping technological change. He went on to say that the insurance sector is “on the verge of a revolution and has been lagging behind every other industry — it has been paralyzed.”
On June 30, 2015, Lloyd’s CEO, Inga Beale, stated in the Financial Times that insurers are in danger of being “uberized” as technology allows companies from other sectors to undermine insurance sectors role to manage risk.
So how do insurers move forward? First they need to keep their current business viable and growing to fund the future. This requires transformation of the existing business by leveraging a portfolio platform of integrated solutions that provide a foundation for reinventing the future — laying the groundwork for a renaissance of insurance.
During business transformation insurers may enhance auto or life insurance policies, processes and customer interaction. But foundational transformations can be used to reinvent insurance such as offering a “family or lifecycle policy” that offers a single bundled policy to meet the broad risk of individual or family needs instead of individual policies for each of the needs. Alternatively, insurers could offer new services that generate revenue as a new component to policies that will provide risk mitigation or value added services, leveraging technology from the connected home and connected auto … all creating a new customer experience and engagement model.
In recent UK consumer research published by Majesco, it revealed that 1 in every 3 customers’ feel that insurers are failing on minimum level service expectations. Even the highest customer satisfaction score in the insurance industry of 69%, reached by motor insurance providers, compares unfavourably with world class companies such as Amazon, which scores 86.7% based on the UK Customer satisfaction Index for January 2015. Furthermore, over 70% of the market indicates they want a ‘family’ product, combining motor, home, travel and pet in a single insurance policy. Nearly 42% would buy a family product tomorrow, while 30% were unsure but did not rule out the option – highlighting that a significant majority (72%) of the market expects access to a product that is not available today.
While some insurers in the US or other markets might assume this has no relevance to them, they should instead consider this a fortunate warning signal that policy bundling is growing in demand. The Internet has created a market with “no borders” because customers research online to seek out new offerings and options to meet their needs. In today’s digital world, what happens in one region does not stay in one region. Rather, these new developments from products to services, new channels, and new approaches to risk are rapidly rippling to other regions. The examples are many. John Hancock’s new life product uses South Africa’s Vitality concept. Google’s compare site was the result of a UK acquisition, Direct-to-consumer models cropped up first and most strongly in Australia and the UK. Any one of a hundred multi-national insurers can send an idea rippling across continents at the speed of an e-mail. Meeting the digital revolution with real transformation is going to require an acceptance that everything we have known about insurance was good for yesterday. The only thing we can count on is the necessity of insurance that has held true from the Hammurabi Code until today.
So as you attend industry events, read articles, blogs and reports, put the topic of business transformation into strategic perspective. Is business transformation helping you move from legacy software solutions to modern, configurable solutions that will handle the unexpected future? Is it about providing a foundation to change traditional business assumptions and business models to provide an enhanced customer experience and value? Will you be the traditional retailer or an Amazon? Will you be the traditional taxi or Uber? Your answer will influence your strategic direction and relevance in a world and a market that is on the precipice of disruption. Will you be disrupted or be the disruptor in the new insurance renaissance? Majesco is focused on transformation as a path to renaissance. Are you?