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Despite seeming reluctant to make sweeping changes, the insurance industry continues to be at the forefront of adopting digital solutions. How Insurtech M&A Could Play a Role in Product and Service Adoption by John Rodgers, Rajeev Aggarwal, and Brian Nordyke for Digital Insurance looks at the role M&A will play in the industry’s adoption of insurtech and the need for established carriers to adapt to the increasingly innovative and service-based offerings new entrants bring to bear. Read a preview below.
It’s been widely discussed that as disrupters give customers a more personalized experience, with more options for easier use of their products and services, legacy firms are feeling pressure to update their own product and service portfolios—or acquire new entrants—to retain business. Customization is something consumers have come to expect across many industries, and the data collected by insurers allows them this same capability—but few carriers are taking full advantage of it.
Disruption in product offerings is shifting traditional mindsets, fueled largely by small to mid-sized firms offering more customization and simplified solutions based on a customer’s past behavior or other data collected. In the alt health and auto insurance industries, user activity data is being used to offer custom insurance plans and quotes in far shorter amounts of time. These solutions are more likely to reach the right people at the right time, and therefore are both better for consumers and an easier sell for insurers.
In today’s market, 25% of premium volume from offerings was not available five years ago. Looking to the future, in three years, 61% of insurers will generate over 30% of their business from service-based offerings rather than products—versus 35% today. These services might include roadside assistance, educational and informational services around cyber security or investments or other service offerings that are easily bundled with insurance products while providing the consumer with added benefits.
There is an emerging shift away from products that protect against loss toward proactive, preventative products and services. Many of these new offerings will use sensors and technology to collect data in a safe and maintained way in order to increase both measurability of risk and the likelihood of prevention. As instant claims payments based on measurable parameters continue to rise, insurance firms are developing simpler digital products for large commercial use. Data analytics allows insurers to get a clear view of the outcomes of these efforts and use them to adjust pricing and offer customers additional personalized solutions.
However, the industry faces a related and potentially bigger problem. With new product offerings comes the need for different capabilities, skills, and behaviors to deliver against these products, many of which feature new technologies that allow for more data collection. This creates a massive need for new capabilities for workers to work with and interpret this data. With more demand to create in-time solutions to specific unfolding customer pain points, the workplace needs to become more skilled and flexible, as testing and iterating will need to happen quickly.
Read the full article here.
John Rodgers is Managing Partner and Chief Operating Officer
Rajeev Aggarwal, Vice President & Head of Financial Services, UK
Brian Nordyke, Senior Director