4 minute read 13 Sep 2019
Business people with building blocks

Five steps to building next wave insurance business models

By Ed Majkowski

EY Americas Insurance Sector and Consulting Leader

Transformational insurance leader.

4 minute read 13 Sep 2019

Show resources

  • NextWave Insurance: Personal lines and small commercial (pdf)

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

Global society is at a crossroads. Faced with unprecedented threats from pandemics, 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.

However, insurers are not immune to shifting trends within their own industry. 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?

Show resources

  • Download our report to find out how insurance is changing.

To help insurers maintain a competitive advantage, the following five steps will help organizations seeking to thrive in the years and decades to come.

1. Define your purpose, clarify your value proposition and differentiate your brand

Defining your company’s purpose and ensuring that it is driven by a higher value other than the bottom line is critical to differentiating your brand and will enhance your value proposition with customers and employees alike.

While providing protection is the ultimate product and purpose of all insurers, in a competitive market small differences matter. Whether your purpose centers on sustainability or charitable causes, it must differ from your competition and be communicated effectively.

To clarify your value proposition, you must first determine what customer problems you can solve and what their most pressing needs are – e.g. comprehensive risk management or functional benefits such as low price and convenience.

Then, you need to ensure that your purpose will be felt – and valued – at that time of their greatest need when they are most likely to be contacting their insurer.

Importantly, you must decide whether you can proactively reach out to customers on a regular basis, rather than only during times of pre-or-post distress. Each of these customer touchpoints should give them an experience that solidifies their understanding of your brand and its purpose.

2. Identify and create the offerings

An insurer’s purpose and differentiation, as well as its customer-first approach, must steer the design of its products and services. As with other industries, the insurance sector must rethink what it offers its customers in today’s digital age.

Insurers must view the entire customer experience as the ultimate product. They can do this by digging deeper into their data and using market intelligence to understand what’s next for their customers.

By thinking beyond traditional insurance products and services, insurers can get ahead of upcoming risk exposures and emerging consumer needs. They can apply this practically by testing new offerings to showcase their innovation to existing customers and traditional distribution partners.

By building products and services around the moments that matter in their customers’ lives, insurers can strengthen customer trust and value perception. The process of enhancing their value offering must be measured in week or months rather than years.

3. Design the right business and operating models

How insurers can improve their capabilities and market and deliver their offerings must be scrutinized. From algorithmic underwriting and no-touch claims processing to omni-channel sales and services, every link in the value chain must be evaluated. 

Insurers deliberating over the best way to achieve sustainable growth and profitability must decide what are the most critical capabilities required to achieve their purpose and how to attain these.  

No insurer can afford to be all things to all customers – they must focus on what they can realistically achieve for future success. For example, one insurer might want to own the entire customer experience and relationship, while sourcing products and services from other partners. Conversely, another may prioritize its efforts on product design and manufacturing, while depending on distribution partners.

In one way or another, all insurers will need to change from a closed, proprietary business models to an open, cloud-based system that leverages the power of digital ecosystems. It is here that alliances and partnerships will play a greater role and accelerate the advantages of a broader ecosystem. 

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. Employees must be given greater authority to make strategic and operational decisions, which will help organizations to attract and retain the best talent. 
  • 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. 


Because the pace of change within the insurance industry continues to accelerate, the pressure to transform will never abate; continuously “working on the business” will be as important as “working in the business.”

About this article

By Ed Majkowski

EY Americas Insurance Sector and Consulting Leader

Transformational insurance leader.