Article Synopsis :
Growing competition from InsurTechs and digital natives, the explosion of e-commerce (and e-everything), and mounting pressures on profitability due to sustained low investment returns are hard realities facing every legacy insurer.
PwC’s report “Connected Insurance – Our view about the Italian Market” shares observations on the unique challenges and opportunities for insurers in the Italian market, which on a percentage basis sells more UBI (connected car) coverage than any other nation in the world.
Insurers don’t operate in a vacuum. The Internet of Things (IoT) is connecting with drivers, homeowners, and health-conscious individuals looking to tap technology to improve their quality of life. The below adaption rates tell an interesting and highly disruptive story:
For legacy insurers, digital levers to support transformation include: Robotic Process Automation (RPA), Artificial Intelligence (AI), IoT, Blockchain, and Analytics. Among these IoT is most disruptive, enabling all others, and enabling entirely new ways of writing insurance especially in auto, home and health. The report issues the following recommendations to deal with increased competition and market contestability:
- Evolve your offering, from core insurance policies towards not just insurance but extended services, leveraging IoT.
- Design ecosystem partnerships, both from a commercial and service perspective, to fully exploit IoT.
- Boost direct/digital distribution channels, integrating them with traditional ones.
- Innovate customer experience in the “moments of truth” (e.g. claims), to address the changing expectations of digital customers.
- Know your customer and customize your offerings.
To cope with margin pressures, boost operational efficiency exploiting digital as follows:
- Re-shape claims management, leveraging IoT to better monitor risks and evaluate occurred claims.
- Reinforce efficiency in back-office processes (e.g. claims, F&A, anti-fraud) leveraging automation tools such as Robotic Process Automation.
- Improve productivity in customer care, exploiting the potential of Artificial Intelligence solutions (e.g. virtual assistance based on chatbots).
- Boost distribution and sales effectiveness, integrating physical channels in e-commerce funnels.
IoT has the potential to create new ecosystems in key sectors with insurers acting as ‘hub’ (i.e., owner of the ecosystem) or service provider (i.e., vendor in the ecosystem):
IoT’s potential impact on specific markets includes:
- Motor Insurance: Reinforced risk rating and pricing capabilities, new and more customizable products, reduced claims cost and frequency, reinforced and selective retention
- Home and Health Business: Still in the initial phase, the key success factors will include cross-industry ecosystems and partnerships, development of enhanced customer engagement models to improve risk and reward good behavior, and adoption of “open” technologies (in terms of devices and platforms)
Business segment highlights within each line of business include:
- Connected Car: Maturing from “Pay as you Drive” to “Pay how you drive/Behavioural” model. More pricing and service innovation forthcoming with the implementation of more engaging models such as “touch” benefits and “try before you buy” policies, etc.
- Smart Home: Major potential to combine technology and advanced/broad assistance and protection services. However, the industry stands the threat of competition from digital giants and utilities owing to the lack of customer proximity and access to state-of-art technologies.
- Connected Health: Industry participants defining new health bundles and combining them with wearable technologies. The next stage is to evolve pricing models towards behavioral frameworks and holistic health service ecosystems.
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