The Future of Insurance – Deloitte Report
Article Synopsis :
Which emerging innovations are most relevant to the financial services industry? How will these innovations impact the ways in which financial services are structured, provisioned and consumed in the future? What would be the implications of these changes on customers, financial institutions, and the overall financial services ecosystem?
“The Future of Insurance: How disruptive innovations are reshaping the way financial services are structured, provisioned and consumed” from Deloitte for the World Economic Forum attempts answers to these three questions.
The report suggests the industry will witness two mega trends around Insurance Disaggregation (e.g., Google, AirBnb and GetAround) and Connected Insurance (e.g., Nest, UP, SmartThings and Apple). Implications of which are summarized below:
♦ Connected Insurance Models: Connected devices and platforms such as sensors, the Internet-of-Things, Communication Protocols and Advanced Analytics are drivings telematics-enabled insurance models such as Connected Cars, Homes and Lifestyles. Standardized platforms such as Apple CarPlay help increase scalability and improve coordination with easy data gathering, management and utilization. Advantages include:
- Easy data utilization, real-time communication and mix-and-match of data
- Connected insurance models enable insurers to have efficient and effective customer engagement through personalized customer offerings, accurate pricing, reduced fraud, access to strong customer data and access to additional channels such as mobile and other connected platforms.
♦ Value Chain Disaggregation: Insurers are facing increased pressure in every link of their value chain from Distribution to Risk Capital & Investment Management. The disruptive forces are e-Aggregators, FinTech providers, Automated Cars, Sharing Economy, Hedge Funds and Securitization. This disruption will lead to the desegregation of the insurance value chain in the future, with the below potential impacts:
- Distribution – E-Aggregators and FinTech providers can disintegrate insurance policies and customer relationships from insurers. They have a competitive advantage in terms of technology from existing retail channels.
- Underwriting – Sharing economy and connected homes/cars/lifestyle concepts will eventually standardize and commoditize risks. This will increase the importance of actuarial and underwriting capabilities and reduce margins on personal and small commercial insurance products and services.
- Risk Capital & Investment Management – Risks will be transferred outside insurance companies to, for example, hedge funds which offer cost-effective options. This will offer more growth opportunities for insurers.
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Digital Insurer's CommentsPer the report, though the most imminent effects of disruption will be felt in the banking sector the greatest impact of disruption is likely to be felt in insurance as traditional mechanisms of measuring risk lose their efficacy as new models and data sources emerge.
Easier utilization of data, mix-and-match of data, and real-time communication enable the development of more personalized, accurate and transparent products delivered with high levels of engagement via digital channels.
Distribution, Underwriting, and Risk and Capital Management are already being disrupted with certain aspects of the Claims process being digitized and/or automated. Focus on these four key areas to succeed in rapidly changing times.
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