Insurers adopt digital business models, but are not equipped to handle threats
As per the findings of a collaborative survey conducted by ACORD and Gartner, Inc. most of the property and casualty (P&C) and life insurer firms have completely misjudged the disturbance that may arise from future industry circumstances and are not equipped to face to new threats. The survey that was conducted during the second quarter of the year 2015 by the nonprofit association of insurance industry standards ACORD and Gartner which included the total of 104 insurance leaders from US, UK and Canada, found out that majority of the insurer firms denied the fact that any specific industry trend was redesigning the industry but rather believed that various trend had noteworthy and modest influence on the business.
Around 78 per cent of survey participants advocated the need to have an effective Web as well as e-commerce strategies, and voted the same as the No. 1 trend having the maximum sway over the industry. Within the digital insurance strategies most of the insurance companies include e-commerce as the priority initiative and through improving the social media interaction, building interactive website or by providing optimized and improved e-service sites the companies strive constantly to maximize their touch with the customers. The second on the list of industry trend estimated to have the maximum impact on future business strategy and vision was the more stringent adoption of cyber security practices and procedures, with backing of 78 per cent of the respondents who believed that it had a substantial or adequate impact. Third on the list was big data/analytics. Yet there were numerous other trends that the surveyors acknowledged as industry-critical- which includes intimidations from nontraditional contenders, Internet of Things (IoT), shifting customer lifestyles and the necessity to generate new bases of income– that were not seen as having a substantial impact overall. Some of the participants specified that these business developments had no influenceon their business policy or vision.
As per the vice president and eminent analyst at Gartner, Kimberly Harris-Ferrante, “These results are risky given the disruption that the industry is experiencing and the speed of change expected over the next few years as digital insurance models continue to be implemented”. “As insurance leaders turn their attention to fulfilling digital insurance business models, they need to be keenly aware of the emerging issues around digital transactions and digital commerce. However, most are not looking at the growing threats from outside or transformational use of external data; for example, from IoT devices. This may be creating a false sense of security that results in insurers investing in incremental business model adjustments, instead of the massive transformation that will be needed to meet the emerging business needs of the insurance market during the next five years and beyond”.
In addition, some of the survey participants did identify these trends as totally restructuring the industry as a whole. However they did not classically view that trend as having the prospective to restructure the business procedure, competitive backdrop or the products industry wide, in spite of their feeling that thismovement had or would have an influence on their own business models. Such companies will therefore be unprepared for new competition as well as towards new customer requirements.
The study results also indicates that there is a central misalignment concerning consumer approachesto emerging competitors and the awareness of those competitors as risks amongst insurance leaders. Insurers overrate the dependence that consumers have on brokers, agents and traditional channels, not comprehending the latent threat that new competitors symbolize and the influence of these consumer-friendly and renowned brands.
The investigation revealed that 53 per cent of the insurers saw the top five players in their local market as the most important threat.
“Having that point of view may be acceptable short-term, but awareness of the possible disruption long-term is imperative for survival. Insurers need to understand the disruption that could occur from new market entrants as they bring in new insurance offerings, represent more consumer-oriented brands, and that have higher loyalty overall”, added Harris-Ferrante.