Historically, the insurance
industry has proven to be incredibly resilient. The basic proposition of
insurance has maintained its relevance with customers as other industries have
risen and then fallen.
However, while insurance
has been resilient, in recent years it has also been relatively stagnant. Growth
is flat. Profitability is constrained, and cost performance is worse when
compared to other sectors. And what we are seeing now is a looming crisis of
relevance for insurance.
To maintain customer
relevance, insurance will need to look different in the coming years.
Driving this change are a few underlying trends that continue to pick up
The nature of risk
is evolving. The rise of digital, decreasing rates of ownership, and
other factors are driving significant changes in the types of assets and
interests that customers are seeking to protect.
expectations are being set by innovators in other sectors, and customers
bring these expectations with them as they consider insurance offerings.
But in insurance, customers primarily see value only when a claim is
filed, and even then “fine print” exclusions often leave them wondering
what they paid for.
creating solutions to both help customers address gaps in coverage and
to simplify the customer experience. Ladder1
has simplified the process of
purchasing life insurance while providing tailored support to customers
along the journey, for example. One of its key features assists
customers with the difficult task of understanding the amount of life
insurance needed for financial security.
While technology is
driving ever-increasing personalization and convenience in other
sectors, risk and pricing models in insurance are still largely based on
aggregate data. Insurers are starting to leverage new sources of data.
, for example, is a platform that
provides property insurance underwriting insights based on
drone-captured images of roofs.
If insurers fail to keep
pace with these trends, they will continue to decline in relevance. Combine this
decline with increasing commoditization and price pressures, and the industry is
ripe for “compressive disruption,” as start-ups and players from other sectors
step into the void to claim higher, service-based returns, leaving traditional
insurance players with declining revenues and profitability.