“Covid has acted like a time machine: it brought 2030 to 2020,” said Loren Padelford, vice president at Shopify Inc. “All those trends, where organizations thought they had more time, got rapidly accelerated.”[i]
This quote from the December 26th Wall Street Journal article, “Covid-19 Propelled Businesses Into the Future. Ready or Not.” noted that business changes that normally might have taken years unfolded in months and that shifts that began as temporary fixes are likely to become permanent due to the pandemic.
My blog at the start of 2020 laid out eight strategic areas for the new decade, but little did we know that our “best laid” plans for the decade would need to rapidly shift, adapt and in some cases accelerate to meet the seismic changes unfolding in the economy, businesses and people’s lives.
The disruption of 2020 creates significant opportunities for those in the insurance industry to accelerate their digital disruption, from new customer experiences to new products and services, channels and business models … if we embrace the disruption.
History Tells a Story of Opportunity
History tells a great story of opportunity by embracing disruption. Looking back at other major crises and catastrophic events, there is a strong relationship between disruption and opportunity – driven by innovation in business and technology. Think about the Spanish Flu. It increased interest in epidemiology and established the national disease reporting system; World War II brought radar and computers; the 1970 oil crisis brought the internet and autonomous vehicle technology; 9/11 introduced social networking, wireless tech and bio monitoring; and the 2008 financial crisis gave rise to the Sharing and Gig Economies and InsurTech. Out of every one of those catastrophic or major events arose fascinating and world-shifting new businesses and technologies that helped us adapt to a rapidly changing world.
Businesses and consumers whom insurance supports are part of this business and technological innovation. COVID-19, among other cultural, demographic and global pressures is changing customer behaviors and business models – creating the demand for new risk products, value-added services and customer experience that the insurance industry must respond and adapt to. Subsequently, these demands create opportunities to make insurance better and more relevant through the innovative application of technology. Most importantly, we have the opportunity to make the change happen if we break down the silos and long-held business assumptions, embrace next generation technology and ecosystems, and more!
Just look at the accomplishments of Operation Warp Speed in the face of an “impossible” challenge: creating, producing and delivering millions of vaccine doses by accelerating the development, manufacturing, and distribution of COVID-19 vaccines, therapeutics, and diagnostics. Using innovative new technologies and an ecosystem of partners – government agencies, biotech companies, medical professionals and more – they were able to break through decades old business models and processes to deliver the impossible! Most impressive – the first approved vaccine was delivered in less than 9 months as compared to the “traditional” long, bureaucratic, complex process that lasted 10-15 years!
The impossible is possible!
Insurance Project Warp Speed
Last year as we entered a new decade, digital transformation was accelerating but we thought we had more time to adapt. But as the quote from Shopify suggests, we have entered a time machine that accelerated all the trends we have tracked to warp speed – most importantly the fast-rising customer expectations and a new generation of buyers, Millennials and Gen Z. These customers require innovative business capabilities that work in a new virtual world accelerated by COVID-19. The result is an increasing demand for next generation technologies that enable digital business transformation with agility and speed.
Facing these strong market and internal pressures to respond, insurers are struggling with how their strategies need to adapt and shift, how to prioritize, where to invest and how to deal with “legacy technology debt.” The 21st century company is now under intense pressure to offer digital and scalable solutions more cost-effectively and with increasingly short timelines. The fight for IT talent and resources to address strategic priorities and operational needs continues to challenge the insurance industry as every business shifts to become a “technology company.”
COVID-19 has created an inflection point that is accelerating digital transformation with a two-speed strategy: first, the speed of operations with functionally-focused digitization and optimization and second, the speed of innovation in creating a next-generation digital business model based on platforms and the technologies within them that embrace a robust ecosystem to drive reach, innovation and growth.
In our new digital age, technology and the business are fundamentally inseparable. Cloud technology is a given, APIs enable technology to be easily componentized, AI and ML help the business to make “smart” decisions, digital experience creates unique and personalized engagement, and platforms eliminate complexity and accelerate the digital transformation journey.
The demands of agility, speed and innovation are dramatically different as we enter 2021 than they were entering 2008 or even 2020. To succeed in the future of insurance, insurers must define their own Insurance Project Warp Speed that will lay the groundwork of a new digital insurance business model that embraces technology with vision, energy and speed.
Insurance Warp Speed Initiatives
In KPMG’s research, compiled from various studies, they found that digitally mature organizations out-perform less mature organizations with 25% higher revenue growth and 31% higher EBIDTA over the last 3 years, 11% higher net promoter scores and faster speed to market by 17 months! Digitally mature organizations not only operate more effectively, they are obsessed with defining, unlocking and preserving value for both their customers and their business.
What are the initiatives that can help insurers digitally mature in 2021?
Cloud Business Platforms Change the Business of Insurance
Realizing the promise of transformation requires a fundamental shift in mindset, from thinking of technology as a function of the business, to becoming the foundational driver of the business. This is where platforms – and the technologies within them – become the bridge to the future.
Platforms can fundamentally change the business from next generation core to digital experience and insurance-specific no code / low code platforms. From the front to the back office, platforms are reshaping the business focus from the policy to the customer, from process to experience, from static to dynamic pricing, from point-in-time underwriting to continuous underwriting, from historical view of data to predictive and machine learning of data, from traditional products to on-demand and parametric products, and so much more. Platforms are just beginning to radically change the business of insurance.
Insurers must align their strategies around core system platforms, digital experience platforms, next-gen technologies and ecosystems, which are technically and architecturally different than “on premise modern core” solutions of the past. The heart of the insurance platform is an orchestration of next gen technologies including cloud-native computing, microservices, APIs, new data sources, artificial intelligence (AI) and machine learning (ML), coupled with an ecosystem of partners that provide innovative or complementary products and services. Digital experience platforms create the ability for constant touchpoints with customers in simple ways by plugging into capabilities that enable cost-effective growth while bringing insurance coverage closer and more personalized to the customer.
Platforms create tremendous potential for both penetrating existing markets and reaching or creating brand new markets. Growth and sustainable long-term success require leveraging platform technologies and reimaging the business model to make the insurance product simpler, making it accessible via other products or businesses, and providing ease of access through any channel.
Embrace Multi-Channel and Innovate Affinity & Program Business Models for Growth
Today’s customers are increasingly digitally adept, with higher expectations, different needs and a demand for better experiences that are not met with the “traditional” insurance approach, creating a fault line between customers’ expectations and insurers’ ability to deliver.
Insurers increasingly are competing in a new paradigm beyond their brand, product, price and distribution – the latter being primarily agents. This new paradigm uses innovative approaches and value creation by transitioning from vertical market boundaries to porous market boundaries – through ecosystems and partners. Leading companies are rapidly developing innovative business ecosystem partnerships that drive growth through the embedding of products in other businesses, revenue sharing, white labeling, and creating new channel options.
Insurance distribution can no longer be limited to traditional ways. It must evolve to new digital models and partnerships that offer or embed insurance offerings within other engagement and purchase journeys. The traditional B2B2C affinity and program business concept offered insurance products through non-insurance or non-financial organizations such as associations, non-profits, employer groups and more. Today’s new buyers do not necessarily associate with some of these traditional groups and will look to buy insurance through other groups such as Gig Economy groups, health and fitness organizations, large retailers, auto manufacturers and more – where the purchase is part of the transaction they are doing. The benefit of adapting to these channel dynamics is that we move from needing to “sell” people on purchasing insurance, to introducing insurance that is ready to be “bought” seamlessly at the point of need, creating a scale-able, sustainable business model.
New Products & Services
COVID-19 changed customers’ risk behaviors, needs and profiles – both individuals and businesses. Driven by these new risks, increased expectation of customer and product personalization, new data sources, and a new dominant buyer group (digitally tech savvy Gen Z and Millennials), there will be increased demand for new products and services.
For individuals there will be an increased demand for usage-based (UBI), parametric and on-demand insurance to align their risk to their actual behavior and needs. In particular, demand for UBI for auto will increase as employees shift to permanent virtual working or a hybrid model that will decrease driving and, therefore, risk. COVID-19 is improving the population’s general understanding about insurance and the service it provides. The result will be an increased demand for life and disability insurance for individuals.
Likewise, for businesses, the continued growth in the Gig Economy will drive increased interest in on-demand voluntary benefits, particularly disability, life, critical illness and long-term care for the periods when companies have Gig employees. With the permanent shift of customer business models to being more digital and flexible – like online buying, curbside pickup and delivery, and more – demand for new coverages such as cyber, umbrella, and commercial auto will rapidly increase. The ability to develop and launch new products in weeks vs. months or years will be crucial to capturing growth opportunities.
The Power of Ecosystems
With the breadth and velocity of change in technologies, customer risk needs and engagement expectations, it is nearly impossible for any insurer to possess, nor afford the acquisition of, the resources and capabilities needed to keep up with the changes, let alone anticipate and stay ahead of them. A digital ecosystem of diverse third-party partner services completely removes this barrier. This powerful combination offers insurers the ability to quickly and easily create customized MVP products, services, and experiences that they can test with different market segments and quickly launch and scale if successful or iterate and test again if not.
As customers, employees, partners and channels shift to digital experiences, the ability for businesses to become increasingly digital and agile is crucial for relevance and competitive advantage. They expect seamless interactions that meet their needs holistically, not product by product. Creating this holistic approach requires platform technologies that allow insurers to choose from a variety of vetted partner apps and plug into them via APIs, and with democratized programming via no code / low code, business and IT users can create new user experiences and offerings. The new experience offers a single point of interaction for customers that eliminates friction between participants of a broader ecosystem.
Insurers can plug into these ecosystems in different ways. Using mobility as an example, insurers could create one unified policy to cover whatever mode of transportation a customer chooses, instead of separate policies for each. Or for life, insurers can look across life, health, wealth and wellness to meet the broader financial lifestyle needs of their customers. Our primary research with auto and life insurance customers confirms the market potential of looking at customers through an ecosystem lens and developing holistic solutions that satisfy a broad set of related needs.
Insurers must expand their horizon to “play” within other, broader ecosystems beyond the insurance vertical, offering an opportunity to embed insurance within the assets, activities or products of other ecosystems, creating new market opportunities for growth.
Data & Analytics Redefine Competitive Dominance
It is very simple: Data matters. Intelligence matters. Analytics matters. A data-driven foundation matters.
I have often talked about data as the lifeblood of insurance. It is a data-driven industry, but we have not effectively leveraged the data we have, let alone the rapidly growing new sources of data to create competitive advantage.
While insurers collect a wealth of core data, few have found a way to capture, analyze and monetize this asset. As more insurance customers interact online — completing various tasks, such as comparing products, prices and services or buying, servicing, and making payments and claims — the volume of data, both structured and unstructured, is increasing exponentially. At the same time, new analytics technologies are emerging to help insurers use data in innovative new ways.
Fueling this shift are customers and their willingness to share new sources of data with insurers so that they get a personalized experience, customized products, tailored pricing, relevant services and meaningful, personal interactions. In particular, the ability to support continuous underwriting and service from real-time data will be crucial.
From a financial perspective, data-driven organizations are seeing improvements of up to 20% to 30% in EBITDA due to unlocked efficiencies and more granular financial insight.[ii] Leveraging this foundation, insurers must rapidly expand data sources from internal, transactional and historical data to new sources of data from emerging technologies and market sources.
Competitive dominance is no longer achieved through operational efficiency, lower prices, massive advertising, large internal systems or channel loyalty. Competitive dominance is achieved by strategically leveraging data and analytics to redefine business models, processes, products, service, customer experiences, markets and channels in innovative ways, laying the foundation for the future of insurance. The time for a data-driven strategy and foundation is now.
Warp Speed Leaders
As we look forward to 2021, we know that change and disruption will remain constants and continue at an accelerated pace. Because of this, the era of succeeding as a “fast-follower” is long gone.
Forward-thinking leaders are both optimizing and nurturing their current business and disrupting it by building their future business. In our upcoming Strategic Priorities 2021 research, we found that despite COVID-19, insurance industry Leaders are widening the gap between Followers and Laggards. As they looked at the next three years, Leaders outpace Followers by 28% and Laggards by a staggering 100% -- up from 21% and 62% last year! Leaders are focused on next-gen platforms, ecosystems, new channels, new products and business models – all key strategies that influence and accelerate growth.
Leaders are making warp speed bold moves with a two-speed strategy to optimize today’s business while creating the future business. The result is that Followers and in particular, Laggards have a growing gap that will be increasingly difficult and expensive to breach, putting their businesses at increasing risk.
So the question is … are you creating insurance warp speed opportunities or are you falling further behind? Your window of opportunity is narrowing. Time is of the essence.
Embrace disruption and the new normal. Make the impossible … possible in 2021!
[i] Ip, Greg, “Covid-19 Propelled Businesses Into the Future. Ready or Not,” Wall Street Journal, December 12., 2021,
[ii] Gleeson, Brent, “The Benefits Of Leading Data-Driven Organizational Change,” Forbes, September 28, 2017, https://www.forbes.com/sites/brentgleeson/2017/09/28/the-benefits-of-leading-data-driven-organizational-change/#4550c4c35e09