The insurance business is turbulent, and it is not just another bout of consolidation. With the advent of the digital economy, innovations like blockchain technology and new FinTech technology, there is a need for overhauling insurance business models. Insurance players may see insurance as the big picture, but many players will soon cover every inch of it. We’re going from an environment with one or two large companies dominating a region to hundreds of localized micro-players providing specialized services. These players will coexist with the large carriers but offer services in specialized areas.
When something changes in the insurance industry for the better, it can seem almost like a disadvantage. When you’re just one of many companies offering too-similar solutions to different but related problems, that can be tough to take. Insurance companies should adopt novel technologies strategically.
In the coming years, insurance business models are going to change for some reasons. It is not only about new possibilities of technology but also about trends inside a business. There are already a lot of different insurance models that we can find in our world. They are based on different things like online insurance, pet insurance, insuring my car, removing your need to travel, pension plans or health covers.
Insurance companies must be able to measure and manage risk digitally or be left behind as different distribution models change how consumers are buying insurance. For example, many insurance companies are changing the way they approach risk. The goal of this shift is to create unique, customer-centric solutions.
Here are some points that insurance companies can incorporate into business model transformations:
- Connect with technology provider:
The last decade has seen the development of a wide range of niche market products for real and personal insurance in response to the growing demand for products that tailor to suit more specialist purposes. Insurance is going to be more mobile, more digital and more specialized in the coming years. To succeed in this new environment, most insurance companies need to join forces with technology providers that enable them with cybersecurity and novel solutions for the digital world. Those insurance companies that fail to do it will simply cease existing.
- Customers are going to expect to have an online experience with their insurance company:
In recent years insurers have started proactively engage with customers online around common subjects like car insurance, home insurance and travel insurance. The insurance industry is seeing a shift from reactive customer service (where a customer rings up an insurer because they have experienced a problem) and more to proactive customer service (where an insurer will reach out to their customer with advice and guidance) because the world of social media demands that they do. There are a couple of large insurance industry changes that are underway. Insurance companies are seeing an overall increase in traffic, sales and leads.
- Solution-based approach, not product-based:
If insurers want to remain competitive in the ever-changing market, they need to face the fact that they are not selling products anymore. They are selling services that are based on solutions and which can be customized. The product-based approach is based upon intuition rather than detailed knowledge of a customer’s true goals and needs. The alternative to product-based solutions is the solution-based approach. The solution-based approach centres its attention on what the customer wants and tailors the product to fit their requirement. From that perspective, product-based solutions are wasteful because time spent customizing features that the customer does not need represents resources consumed without improving sales.
The industry has realized that the old ways of doing business are no longer effective, and new approaches are required. The shift from product-based sales to a solution-based customized approach is much more needed. Increased use of online technology has fundamentally changed the relationship that customers have with their insurance companies. As the technology deals with the challenges, an insurer must act fast and build business relations with the current technology providers.