At the end of 2019, Home Depot adjusted its famous tagline from, “More saves. More to do, "to" How to do more done. "And despite COVID-19, those who have done things have done it. Home renovations are far up, with everything from smaller renovation projects to major construction projects on the way up. Timber prices are up. Home Depot and Lowe's share prices are higher due to a 23% increase in sales – 25%. [i] While entertainment is limited, travel is limited and eating out is rare, but a large part of the nation takes the opportunity to think about home life and wonders: “What can we do with this free time that will improve our living space for the future? "
In the insurance field, some insurance companies are also in the middle of a dramatic redevelopment project. What can we do with this time? Choices must be made. Which redevelopment projects will modernize and optimize the business, and which will create a The new challenges for insurers are the revised time horizons. COVID and its digital press have compressed previous assumptions. Investments planned on a 3 to 5-year path are now being moved to 1
For decades, the creation and development of insurance markets and products has developed at a slow and steady pace. Insurers' technology, data and processes were adapted to take advantage of these opportunities – sometimes through technology updates, extensive adaptation or through new technology. The result of this approach was highly tailored and costly systems that did not adapt quickly to market changes. They increasingly reacted to market shifts or opportunities. The companies succeeded and lived with a slow transformation because everyone was in a similar position – new products took 9-18 months or more to build and launch. Adding new distribution channels can take 6-12 months. These long time frames slowed down and limited market, revenue and growth opportunities because they were not only long but expensive.
But the market is very different now. The pace is significantly different. The types of change have expanded. The ever-changing risks, customer behaviors and expectations, technology-driven opportunities, new data sources and blurred market boundaries have increased the demands on the insurance market for new products and services that the old technology cannot support. Today, insurers must be able to launch new products in a few weeks, new features in days, new channels in weeks or days and new prices or rules in hours.
Majesco's latest report on strategic priorities for 2021 looked at both "traditional" market trends and new and emerging market trends. Insurers continue to show the highest levels of action in the "traditional" market trends, where Cyber Risk / Data Security and Creating Value Added Services moved past the planning / pilot project and into implementation. Most people continue to plan and test the use of New data sources for pricing and insurance something that insurance customers, especially Gen Z and Millennials, want based on our consumer and SME research.
Encouraging, strong progress in Creation of new insurance models was made in the planning / pilot project with the strongest year-over-year hope of all trends (see Figure 1).
Lower activity among new trends
In the newer or emerging trends, insurers continue to consider offers for Sharing / gig economy, Embedded insurance, and On-demand insurance as maintains similar activity levels as last year. Micro-insurance and Parametric insurance show the lowest interests. Although it is low this year, we suspect that parametric insurance will see an increase next year due to an increased interest in UBI insurance as a result of changed behavior and less driving.
Figure 1: Insurers' responses to opportunities created by technology and market trends
The concern with these low activity levels is that they represent blind spots for insurance companies compared to market potential and customer demand.
Embedded insurance, which is estimated to account for 25% of the global market by 2030 with $ 700B in GWP [ii] shows significant gaps between customers and insurance companies. (See Figure 2.) Only 13% of insurers offer or carry out an embedded insurance and only 38% consider or plan / plan it. The 60% gap between customer demand and the insurer's offer for Gen Z and Millennials reflects a big blind spot and market opportunity for those who can respond quickly. Offering what their parents bought and have is not necessarily what they want or need!
These blind spots reflect insurers' challenge of responding to a new generation of buyers who want different products through different channels to meet a new era of customer needs and expectations.
Figure 2: Customer insurer gaps in embedded and on-demand insurance
Fortunately, some insurance companies are actively exploiting these opportunities. Although they are likely to offer traditional products, insurance companies that offer new products significantly lead over others who are not. The only trend that is adapted between traditional and new is Cyber risk / data security and it is the only trend where those who only offer P&C products do not come last or second last compared to those who offer new products , L & A / Group products or multiline products.
This highlights the risk for the P&C segment. If they remain focused on only traditional products, they will lose new and rapidly growing market opportunities.
In terms of the specific technologies that drive the insurance platform, we see the strongest and most consistent adoption of mobile and Cloud / SaaS, while Digital Experience platforms made a significant leap compared to the previous year (see Figure 3). The results we have seen for Cloud / SaaS in our research are in line with the trend that SMA has also found: in their report on P&C Core Systems' purchasing trends 2019, they noted that 84% of the core system agreements were used in the cloud and 32% of these cloud distributions were SaaS with several tenants. [iii]
APIs and AI / machine learning enter the planning / pilot phase, the tipping point for more comprehensive implementation and adoption. Micro-services and platforms with low code / no code are still at the beginning of the adoption. These two key components give the insurance platform its unique ability to quickly adapt to new market opportunities by making changes to components of insurance processes (micro services) rather than having to change an entire shutdown process and by opening configurations to a wider audience of citizen developers (low code / no code).
Figure 3: Insurers' level of activity to add platform technology
All three Customer Engagement technologies – Digital payments, social and chatbots – saw significant increases compared to the year before activity driven by the sudden need to implement effective self-service features such as response to COVID. In particular, the increase in digital payments highlights the acceleration of open banking and innovative payment technology companies.
In a recently published InsurTech Forum article, it was noted that open banking has encouraged competition and innovation by requiring banks to share data with third parties such as payment technology companies and by creating customized payment methods through new apps and data streams which will be hard to ignore for companies (sellers like insurers). [iv] The interest in advanced computer-aided digital payments comes from customers' increased comfort with online banking and shopping under COVID.
Knowing how and why this applies to insurers is crucial.
- Customers quickly develop their own basis for how they pay for services and move money – they choose the methods that are easiest and that give them the most points or benefits
- If speed, ease and familiarity trump research, product strength or even With pricing, open banks and open platforms in general will enable all market-savvy companies to create insurance business. Companies with massive customer bases, such as Walmart, Tesla, PetCo, Ikea and Amazon, can win simply because of their position in the customer's lifestyle.
- The end result is that not integrating a technology (such as IoT devices or Telematics) can damage an insurer's ability to embed its products, offer its own new products through new partnerships, or quickly capture a new industry.
It is not surprising that companies in the New Products business area lead all others in 11 of the 16 technologies covered by the survey, including the most important platform technologies for Cloud / SaaS, APIs, AI / Machine Learning and Microservices. The same company is in step with the Multiline Products segment for two other platform technologies, Digital Experience Platform and Low Code / No Code Platform.
Most importantly, the companies that make the strategic decision to adopt these key platform technologies that surpass others innovate with new products and services and adopt the view that they are "technology companies that provide insurance" as opposed to "insurance companies that use technology. ”
Insurers' digital transformation is supported by increasing customer expectations for new experiences . In their response, insurers are strongly focused on customer service applications and portals, with 41% to 61% of companies saying they implement or have already implemented them.
Self-service tools and portals have been around for some time, but they do not meet the change in the desire for personal, holistic experiences because "out of the box" portals are functionally focused … ie. an app for app or quotation tap. On the other hand, digital insurance platforms are transforming these older approaches from lost, separate transactions to more satisfying, holistic experiences for customers, channel partners and employees that we noted in our lives and car customer research. implement or have implemented digital opportunities for intelligent claims, intelligent insurance, intelligent digital marketing and market segmentation, and for reporting, modeling or compliance, with over 40% planning or pilot projects for these, highlighting the acceleration of their digital capabilities.
While the overall high level of interest in these digital features is encouraging, some very significant differences between business and IT need to be addressed in order to maintain and accelerate momentum.
Corporate ratings were higher than IT for:
- + 95%: Innovative, personalized products (3.7 vs 1.9) – This link reflects the increased decision-making of business leaders to use new SaaS cores and digital platforms to launch new products quickly, rather than on existing systems or traditional processes. In some cases, IT is not even needed.
- + 42%: Benefits of digital employees on board and commitment (3.4 vs 2.4) – The expansion of voluntary benefits and the complexity of reporting employees and keeping them informed is becoming increasingly important to win the customer.
- + 32%: Built-in agent, service, management platform (3.3 vs 2.5) – Agents felt the effect most during COVID with the lack of digital functions in addition to the traditional quotation portal or upload / download for AMS systems . Increased M&A with agencies puts pressure on the business to respond to retain and attract agents.
- + 18%: Customer Service Portal (3.9 vs 3.3 ) – This has been a constant focus area, but is moving to expand beyond the traditional portal on websites to a much more personal and sophisticated experience.
Finally, multi-line carriers are very active in creating digital functions. Driven by the complexity of several products, they want to digitize, simplify processes and provide self-service functions for customers, employees and agents (see Figure 4).
Figure 4: The insurers' level of activity to add digital functions by industry
So the question for each insurer is: What do you do with your free time during COVID? Which remodeling projects are you focused on that will modernize and optimize the business, and which will create a whole new company next door? What we can say is that the competition is focused on this and takes advantage of this free time!
In our last blog in this series, we will look at the strategic priorities of Partnerships and Ecosystems . Are insurers going backwards in the development of these important relationships? Is the industry preparing for a future with ecosystem-driven sales and service or is it lagging behind other industries in extensive use?
Get all the information by downloading Strategic Priorities 2021 and be sure to set up next week's forward-looking webinar, Acceleration of Digital Businesses and the increase in demand for commercial, special and cyber insurance.
[i] https://www.cnbc.com/2020/11/20/home-depot-and-lowes-earnings-boosted-by-pandemic- induced-nesting.html
[ii] Torrance, Simon, "Embedded Insurance: a $ 3 Trillion market option, that could also help close the protection gap," LinkedIn, December 10, 2020, https: //www.linkedin. com / pulse / embedded-insurance-3-trillions-market-opportunity-could-simon-torrans /
[iii] Furtado, Karen, "P&C Core Systems Purchasing Trends for 2019: Basic Technology to Drive the Transformation Journey," Strategy Meets Action, April 2020
[iv] Heun, David, "How Open Banking Can Change the US Payments Market," InsurTech Forum, January 25, 2021, https://insurtechforum.net/how-open-banking-can- transform-the-us-payments-market /