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Digital Disruption the new Game Changer

The latest PWC study titled Insurance 2020 & beyond: Necessity is the mother of reinvention, provides important insights into how technology will empower and shape the financial services industry in future. The information below was extracted from the report. We provide a link to the full study at the end of this article.


The emerging game changer is the advance in analytics, from descriptive (what happened) and diagnostic (why it happened) analysis to predictive (what is likely to happen) and prescriptive (determining and ensuring the right outcome).

Most insurers have invested in digital distribution, with some now moving beyond direct digital sales to models that embed the company’s products and services in people’s lives (e.g. pay-as-you-drive insurance).

A parallel development is the proliferation of new sources of information and analytical techniques, which are beginning to reshape customer targeting, risk underwriting and financial advice. Ever greater access to data doesn’t just increase the speed of servicing and lower costs, but also opens the way for ever greater precision, customisation and adaptation.

As sensors and other digital intelligence become an ever more pervasive element of the Internet of Things, savvy insurers can – and in some instances have – become trusted partners in areas ranging from health and well-being to home and commercial equipment care. In turn, digital technology could extend the reach of life, annuities and pension coverage into largely untapped areas such as younger and lower income segments by reducing costs and allowing businesses to engage with customers in more compelling and relevant ways.

Information advantage

Both traditional and big data availability is exploding, with the resulting insights providing a valuable aid to greater customer-centricity and associated revenue growth. Yet many insurers are still finding it difficult to turn this data into actionable insights. The keys to resolving this are as much about culture and organisation as the application of technology. Making the most of the information and insight is also likely to require a move away from lengthy business planning to a faster and more flexible, data-led iterative approach. Insurers would need to launch, test, obtain feedback and respond in a model similar to that used by many of today’s telecoms and technology companies.

A combination of big data analytics, sensor technology and the communicating networks that make up the Internet of Things would allow insurers to anticipate risks and customer demands with far greater precision than ever before. The benefits would include not only keener pricing and sharper customer targeting, but a decisive shift in insurers’ value model from reactive claims payer to preventative risk advisors.

The emerging game changer is the advance in analytics, from descriptive (what happened) and diagnostic (why it happened) analysis to predictive (what is likely to happen) and prescriptive (determining and ensuring the right outcome). This shift would not only enable insurers to anticipate what will happen and when, but also respond proactively. This offers great possibilities in areas ranging from more resilient supply chains and the elimination of design faults to stronger sales conversion rates for life insurers and more effective protection against fire and flood within property coverage.

Disruption and innovation

Many forward-looking insurers are developing new business models in areas ranging from tie-ups between reinsurance and investment management companies to a new generation of health, wealth and retirement solutions. The pace of change can only accelerate in the coming years as new innovations become mainstream in areas ranging from wearables, the Internet of Things and automated driver assistance systems (ADAS) to partnerships with technology providers and crowdsourced models of risk evaluation and transfer.

At the same time, a combination of digitisation and new business models is disrupting the insurance marketplace by opening up new routes to market and new ways of engaging with customers. An increasing amount of standardised insurance will move over to mobile and internet channels. But agents will still have a crucial role in helping businesses and retail customers to make sense of an ever more complex set of risks and understanding the trade-offs in managing them. On the life, annuities and pension side, this might include balancing the financial trade-offs between how much they want to live off now and their desired standard of living when they retire. On the P&C side, it would include designing effective aggregate protection for an increasingly broad and valuable array of assets and possessions.

Companies can bring innovations to market much faster and more easily than in the past. This includes the new entrants that are using advanced profiling techniques to target customers and cost-efficient digital distribution to undercut incumbent competitors. It’s too soon to say how successful these new entrants and start-ups will be, but they will undoubtedly provide further impetus to the changes in customer expectations and how insurers compete.

Click here to download the full PwC report.

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