The traditional business model for insurance, though still a tremendous source of revenue, is becoming less sustainable in the long term because of the rapid innovation that the Internet of Things is driving throughout the economy. The risk for insurance is becoming a mere commodity.
But the disruptive technologies of the Internet of Things are an opportunity for insurers who act quickly to define new roles and create a connected offering model. In this environment, it is critical to be an innovator across the entire insurance value chain and also to be effective operating across a broader partner ecosystem.
Effective leadership will be essential in creating a vision for becoming an Insurer of Things and then putting in place the incubators and operating models to make that vision a reality. Considerable risks are involved in this transformation, but the risk of doing nothing is far greater.
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The Internet of Things (IoT) is driving a connected, as-a-service economy, and traditional insurers must adapt quickly. Three dimensions of the industry will be most affected:
Different consumer expectations.
Customer needs are expanding and becoming more liquid. People are moving from “siloed” needs (e.g., buy the car, fix the car, insure the car) to a set of combined expectations encompassing multiple needs.
New products and new risks.
Given evolving customer expectations and the transformative potential of the IoT, insurers are now selling outcomes and experiences, not just things. Insurance coverage is becoming a part of a broader value chain with new types of products and services—and new risk pools, as well.
New competitors and new contestable markets.
Because insurers will position their offerings within a broader network of services, they will no longer compete just with other insurance companies, but also with players from a variety of traditional and innovative industries, creating new contestable markets.
Accenture has identified five keys to achieving success as an Insurer of Things:
Choose the role you intend to play. First, insurers can act as service providers, supplying an innovative technology-based insurance product to a third-party ecosystem, with other industry players acting as aggregators of the extended offering.
Second, insurers can be value aggregators, launching innovative and extended offerings, beyond traditional insurance, and directly selecting and managing the partners they need.
Define a connected operating model. Insurers will need to define a connected offering model across three integrated layers: insurance product, technology, and ecosystem services
Take action across the value chain. Because the IoT will affect every phase and process of the insurance business, insurers need to extend, automate and adapt the insurance value chain.
Share and collaborate. Insurers will need to open up to the outside world of ecosystem partners—sharing not only customer data, but customers themselves. IT architectures will need to evolve, ensuring flexibility and interoperability with external partners and providers.
Foster a culture of innovation. This new culture will need to be infused across the whole organization, from idea generation to workforce training and onboarding.