The insurance industry is not immune to the shifts being created by a digitally driven world. In fact, as a data centric sector, the future insurance landscape is heavily tied to embracing new modes of dealing with data. In our third instalment on the insurance sector we look at what the future holds.
Asia-Pacific will be the dominant driver of world insurance growth by 2020. However, a macro insurance trend is emerging: the industry will become more globalised as countries align regulations, standardise practices and distribute products across borders, with the help of borderless digital distribution. What this could lead to is bigger market share for global insurers, greater economies of scale and also provide smaller players with opportunities to diversify and specialise using the tools provided by emerging data driven innovations.
Why big data is driving the way forward
The fate of the insurance industry is based on data and with internet connected devices and sensors projected to reach 50 billion by 2020, the availability of real-time information will radically change the game. Those that are poised to win and hold a competitive advantage are insurers or data analysis providers that can utilize and ‘farm’ this information for better pricing, underwriting and loss control.
The rise of advanced analytical techniques and tools to process large volumes of unstructured and multimedia data, such as real-time video and surveillance, life blogging and social media communications are gamechangers. With these tools in place, the industry will now have hardware and software that can augment and translate big data in all its forms into actionable and very telling insights. It will also enable insurers to make highly strategic, futurist decisions.
Within the organisation, internal data management will also be key to sustaining these shifts. In particular, standardised data models, toolsets and points of access from which the data can be harnessed will be critical. Quite simply, data is the new oil and insurers will need to effectively use it to stay ahead.
First mover advantage: These are the insurers who go-to-market ahead of the pack with innovative products and services. They leverage predictive data capabilities to penetrate new markets, better segment existing markets and target customers in new and unique ways.
Early adopters: This group doesn’t want to be first to market and intentionally leaves the bigger players to take the first mover advantage, as they can afford the risk. However, these carriers are the first to assess the first movers’ efforts, refining their implementations and strategies before the mainstream does.
Hybrids: Data and analytical power will give insurers new powers to develop specialties that have not been seen elsewhere in the industry. With these specialized skill sets on the horizon, hybrids can leverage their speciality skills to establish mutually beneficial partnerships with other players – from both within and external to the industry.
However, in order to be a first mover, early adopter or hybrid, it’s critical that insurers have the systems and processes in place to rapidly respond to the industry’s new data-focused needs. With insurance companies spending typically between 50 to 70 percent of their IT budget on simply running the business, the sector must learn to be strategic in its technology investments. One way is by turning to data centers to rapidly and effectively manage their IT infrastructure; this enables the rapid processing of data and allows insurers to analyse data in real-time, a critical component to the success of insurance companies.
Without these foundations in place, though, carriers will not be poised to succeed in this changing landscape. After all, no one wants to be a supertanker – those that don’t have flexibility or the resources to succeed in the future of the industry.
Interested to learn more? Check out our Insurance Providers Digital Edge Playbook.