Digital Disruption in the Insurance Sector

Posted on: June 20, 2016 by

Despite a slow start, the insurance industry is beginning to really feel the impact of digital disruption. Not content being left behind by the likes of the retail, banking (and financial services), healthcare, and telecoms sectors, the insurance market is now ready to embrace the digital revolution.


First movers like Zubie, a US car insurers using telematics or UK-based Insure the Box – have already begun to disrupt the market. So too has US health insurer Humana, offering a more transparent digital plan that is pushing the usual players to reinvent their own propositions.

However, despite this push towards digital, research has revealed that half of insurers do not have a realistic plan to become a digital insurer. Contrast this with customer expectations, where 79% of consumers expect to use a digital channel for insurance interactions in the next few years and it becomes clear that the industry is heading towards a crunch point.

Ultimately, digital disruption of the Insurance industry concentrates on three main topics: customer demands, risk mitigation, and business reinvention.

Keeping up with the customer:

As within any other B2C industry, digital disruption’s biggest impact will be felt in the customer’s experience. Seamless personalized omni-channel experience is the new standard throughout the customer journey: no matter whether the customer is doing initial research, making a decision to buy, ordering services or considering changing their insurance policy.

This requires insurers to rethink their business operations, placing an emphasis on mobile, social and cognitive analytics technologies. The next step will be the virtual assistant taking the customer experience to a higher level. US health insurance provider Oscar is a great example of this, offering an intuitive and easy to understand step-by-step approach to purchasing a policy.

Staying in control of risk:

For insurers, understanding and managing risk will never be an easy task. However, new analytical technologies and the abundance of (personal) data now available opens up the possibility for providers to better to understand risk.

The introduction of ‘Internet of Things’ technology is fundamentally changing the way we manage risk. Connected cars, for example, can deliver data on the actual driving behavior and therefore help insurers assess that driver’s personal levels of risk. This allows insurers to offer policies based on individual behavior. The approach is not, however, without its drawbacks and finding the right balance between data privacy and attractive insurance policies will take time and careful consideration.

Reinventing the industry:

The quest is to find a business model which can take advantage of the new digital possibilities is more pressing than ever.

The move from indirect sales to direct online sales is becoming a clear change for the industry. Also, the integration, or the emergence of interconnected ecosystems, with producers of cars, sporting equipment, housing, and healthcare, will be a key driver for business reinvention. The global partnership of BMW and Allianz is a prominent example.

While we can be optimistic that things are moving in the right direction, it will be a long and tough road to get digital right. The difference between the first flying plane of the Wright brothers in 1903 and modern planes might be as large as the difference between today’s digital implementations and their full potential. However, insurers should start now to build and execute a realistic plan to survive in the new digital era.

Here’s are three crucial steps to making it happen:

  • Put together a team with different backgrounds, using skills from business, digital technology, and creative experts to define the digital vision and roadmap.
  • Be ready to adapt. As you enter new territory, executing your planned roadmap may not be as easy as you expect. Be agile, learn fast and if it doesn’t work then change it.
  • While learning through multiple agile projects, strive to maintain a common digital platform to ensure successful digital services can build on each other rather than shine in splendid isolation.

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