Five steps to building next wave insurance business models

How traditional insurers can play a greater role in society by transforming their business models.

Global society is at a crossroads. Faced with unprecedented threats from climate change, cyber-crime and disruptive technologies, to demographic shifts and social unrest, it needs exceptional advice and solutions from the insurance industry to help mitigate these risks.

With unrivalled ability to understand and model risk, insurers have a rare opportunity to give society the surety it needs during this transformative age.

However, insurers are not immune to shifting trends within their own industry (pdf). Declining levels of consumer trust, along with legacy technology systems and a skills gap mean that new alliances and partnerships are vital to strengthening the industry’s capabilities and solutions.

Indeed, with potential threats of lost revenue from personal and commercial auto risk to increasingly complex questions concerning consumer privacy and the use of data, insurers will be forced to rethink their existing service and offerings. And although many insures have been aware of these impending issues, amongst others, the urgency for action has increased.

Essentially, insurers must ask if future growth opportunities will offset upcoming threats in the next wave of insurance?

4. Build the enabling capabilities 

Even if insurers create an aspirational purpose, design new offerings or transform their business model, they must also improve their execution. Tomorrow’s leaders will stand-out for attributes that include:

• Extreme agility in product design and development by using minimally viable products, agile product management techniques, and rapid A/B testing.
• Innovative thinking with business leaders propelling innovation through cultural change and organizational models that administer decision-making and risk-taking.
• Full digitization and mass automation, from the modernization of core systems for straight-through processing, to the use of AI and drones for claims processing, while constantly engaging customers through multiple channels. 
• Data and analytics with the ability to quickly process internal and external data and make it available for data scientists and business analysts; top performers will have hundreds of predictive models to optimize everything from pricing to claims to customer acquisition.
• Trust by design, employing sophisticated technologies and strong cultures to secure company assets and to protect and respect privacy in a manner that exceeds the baseline requirements of emerging regulations. 

5. Manage the transformation 

In the end, insurance leaders’ abilities to drive organizational change may be the most important capability for any organization.

The following aspects can help shift an organization in the right direction:

• Strong leadership: Substantial change must be sponsored from the top of the organization. Along with being highly visible and authentic, it must be actively defined, managed and measured. 
• Talent and workforce: Tomorrow’s top insurers will have radically different skillsets e.g. many more data scientists. Employees must be given greater authority to make strategic and operational decisions – this will help organizations to attract the best talent and create an empowered working environment. 
• Proper governance: Insurance organizations must encourage formal governance processes with new methods for investment allocation, performance measurement, resource management and business and technical architecture. 
• Agile collaborations and partnerships: Collaboration that is led by product owners is critical to driving more integrated, customer-centric organizations. Equally, partnerships and alliances with the right external firms will foster confidence in this way of working. 

These five steps give insurance leaders the ability to transform their traditional business operations. Organizations wanting to become the preferred choice of their customers must recognize that to provide society with tailored products and services that help to mitigate future risks, they must change how their businesses will fit within insurance’s next wave.