On-demand insurance: Challenges and opportunities for large insurance carriers
Article Synopsis :
Digitalisation allows greater tailoring of products and with convenience overtaking price as a key motivator, on demand insurance is on the rise.
Technology is enabling almost instantaneous risk assessment, rapid policy issuance, and seamless claims handling.
Tailoring can include:
- coverage of shared resources;
- episodic coverage; and
- preferential premiums for proactive safety measures taken by the insured.
This will have a huge impact on value chains and large institutional carriers are seeking to take part through emergent technologies, complementary partnerships, and transforming their businesses to replace their traditional services.
Originally focused on small items such as mobile phones, laptops, cameras and other valuable personal goods, this is being expanded into more conventional areas of cover, such as travel, home, auto, rental, and life insurance.
But changing to on demand insurance is no simple switch. There are internal pressures such as legacy systems to consider alongside external ones from regulators and existing sales channels.
Most projects are piecemeal and this paper says insurers need a more coherent and measured approach to on demand insurance.
Tata says there are three waves insurers need to navigate – collaboration, value generation, and establishing ecosystems – if they are to be successful. Though expressed as linear periods of time, Tata says that insurers can be working on a number of waves simultaneously.
Wave 1: Collaboration (0 – 2 years)
This first wave will see insurers enter into partnerships with insurtechs and aligned industries to experience on demand insurance, analyse customer behaviour, work together on new products and boost sales. This wave is currently underway for many large carriers.
In this wave, carriers must focus on institutional agility, hybrid products, data management, and collaborative ecosystems.
Wave 2: Value generation (3-5 years)
Insurers must leverage the latest technologies and adapt to new business and actuarial models in order to deliver value to consumers. Some are already exploring customised coverage for just this reason. .
Processes will be improved to drive value generation and this is essential as more and better data is required to manage risk and handle fraud.
Increased automation in sales will increase data consistency while AI based risk monitoring will improve product delivery.
Insurers must exploit technology differently if they are to be successful.
Wave-3: Cross industry synergies (6-7 years)
The traditional value chain reaches outside the current limits of the insurance industry.
It will be essential for carriers to understand the impact of changes in other industries, such as IoT and blockchain and how it will generate data that will provide opportunities for synergies.
Increased personalisation will be demanded by both individual and corporate customers.
Tata says large insurers must back their current strengths – wide customer base, valuable customer data, and deep pockets – with appropriate insurtech partnerships that will deliver better service and customer experiences.
On demand insurance will become a disruptor in the coming years and large insurers must identify their position within these three waves if they are to survive and thrive.
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Digital Insurer's CommentsTata’s greatest insight here is perhaps not about the phases – or waves – of development. Instead, it is its belief that incumbents can participate in all waves simultaneously rather than work through each systematically.
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