"Covid has been a time machine: it took 2030 to 2020," said Loren Padelford, vice president of Shopify Inc. "All of these trends, where organizations thought they had more time, accelerated rapidly." [i]
This December 26 quote Wall Street Journal article, "Covid-19 Propelled Business Into the Future. Ready or Not." noted that business changes that may normally have taken years have developed over months and that changes that began as temporary corrections are likely to become permanent due to the pandemic.
My blog in early 2020 outlined eight strategic areas for the new decade, but little did we know that our "best laid out" plans for the decade would need to change rapidly, adapt, and in some cases accelerate to meet evolving seismic changes. in the economy, companies and people's lives.
The disruption from 2020 creates significant opportunities for the insurance industry to accelerate their digital disruptions, from new customer experiences to new products and services, channels and business models … if we embrace the disruption.
History tells a story about Opportunity nity
History tells a fantastic story about opportunities by embracing disorders. When we look back at other major crises and catastrophic events, there is a strong link between disruption and opportunity ̵
Businesses and consumers as insurance support are part of this business and technology innovation. COVID-19, including cultural, demographic and global pressures, is changing customer behaviors and business models – creating demand for new risk products, value-added services and customer experiences that the insurance industry must respond to and adapt to. Thereafter, these requirements create opportunities to make insurance better and more relevant through innovative application of technology. Most importantly, we have the opportunity to make the difference happen if we break down silos and long-term business assumptions, embrace the next generation of technology and ecosystems and more!
Just look at the achievements of Operation Warp Speed in the face of an "impossible" challenge: to create, produce and deliver millions of vaccine doses by accelerating the development, manufacture and distribution of COVID-19 vaccines, therapies and diagnostics. With the help of innovative new technology and an ecosystem of partners – authorities, biotechnology companies, medical staff and more – they were able to break through decades-old business models and processes to deliver the impossible! Most impressive – the first approved vaccine was delivered in less than 9 months compared to the "traditional" long, bureaucratic, complex process that lasted 10-15 years!
The impossible is possible!
The speed of the insurance project
Last year, as we entered a new decade, digital transformation accelerated, but we thought we had more time to adapt. But as the quote from Shopify suggests, we have entered a time machine that accelerated all the trends we have tracked to speed – most importantly the rapidly rising customer expectations and a new generation of buyers, Millennials and Gen Z. These customers demand innovative business features that work in a new virtual world accelerated by COVID-19. The result is a growing demand for next-generation technology that enables digital business transformation with agility and speed.
To meet these strong market and internal pressures to respond, insurers are struggling with how their strategies need to be adapted and shifted, how to prioritize, where to invest and how to manage "older technology debt". The company from the 20th century st is now under intense pressure to offer digital and scalable solutions more cost-effectively and with increasingly shorter timelines. The struggle for IT talent and resources to manage strategic priorities and operational needs continues to challenge the insurance industry as each company shifts to a "technology company".
COVID-19 has created a turning point that accelerates digital transformation with a two-speed strategy: first, the operating speed with functionally focused digitization and optimization and, second, the speed of innovation to create a next-generation digital business model based on platforms and technologies within them which includes a robust ecosystem to drive reach, innovation and growth.
In our new digital age, technology and business are fundamentally inseparable. Cloud technology is a given, APIs make it possible to easily compose technology, AI and ML help the company make "smart" decisions, digital experience creates unique and personal commitment and platforms eliminate complexity and accelerate the digital transformation journey.
The requirements for agility, speed and innovation are dramatically different when we enter 2021 than they were in 2008 or even 2020. To succeed in the future of insurance, insurers must define their own insurance Project Warp Speed which lays the foundation for a new digital insurance model that includes technology with vision, energy and speed.
Insurance Warp Speed Initiatives
In KPMG's research, compiled from various studies, they found that digitally mature organizations surpass less mature organizations with 25% higher revenue growth and 31% higher EBIDTA in the last 3 years, 11% higher net promoter points and faster marketing by 17 months! Digitally mature organizations not only function more efficiently, they are obsessed with defining, unlocking and preserving value for both their customers and their business.
What are the initiatives that can help insurers to mature digitally in 2021?
Cloud Business Platforms Change the Business of Insurance
Realizing the promise of transformation requires a fundamental change of mindset, from thinking of technology as a function of to becoming the fundamental driving force of the business. This is where platforms – and the technologies within them – become the bridge for the future.
Platforms can fundamentally change the business from the next generation core to digital experience and insurance-specific platforms without code / low code. From front to back office, platforms transform business focus from policy to customer, from process to experience, from static to dynamic pricing, from point-in-time guarantee to continuous guarantee, from historical view of data to predictive and machine learning of data, from traditional products for on-demand and parametric products, and so much more. Platforms have just begun to radically change insurance business.
Insurers need to adapt their strategies around core system platforms, digital experience platforms next generation technologies and ecosystems, that are technically and architecturally different formerly "modern core solutions". At the heart of the insurance platform is an orchestration of next-generation technologies, including cloud-based computing, microservices, APIs, new data sources, artificial intelligence (AI) and machine learning (ML), along with an ecosystem of partners providing innovative or complementary products and services. Digital experience platforms create the opportunity for constant points of contact with customers in simple ways by connecting to functions that enable cost-effective growth while insurance coverage approaches and becomes more personalized for the customer.
Platforms create enormous potential for both penetrating existing markets and reaching or creating entirely new markets. Growth and sustainable long-term success require the use of platform technologies and the transformation of the business model to make the insurance product easier, make it available through other products or companies and provide easy access through all channels.
Embrace Multi-Channel and Innovate Affinity & Program Business Models for Growth
Today's customers are becoming increasingly digitally skilled with higher expectations, different needs and a demand for better experiences that are not met with the "traditional" insurance strategy, create a fault line between customers 'expectations and insurers' ability to deliver.
Insurance companies are increasingly competing in a new paradigm in addition to their brand, product, price and distribution – the latter being primarily agents. This new paradigm uses innovative approaches and value creation by moving from vertical market boundaries to porous market boundaries – through ecosystems and partners. Leading companies are rapidly developing innovative business ecosystem partnerships that drive growth through embedding products in other companies, revenue sharing, white marking and the creation of new channel alternatives.
Insurance distribution can no longer be limited to traditional ways. It must be developed into new digital models and partnerships that offer or embed insurance offers in other engagement and purchasing trips. The traditional B2B2C affinity and business concept software is offered to insurance products through non-insurance or non-financial organizations such as associations, non-profit organizations, employer groups and more. Today's new buyers do not necessarily associate with any of these traditional groups and will try to buy insurance through other groups such as Gig Economy groups, health and fitness organizations, major retailers, car manufacturers and more – where the purchase is part of the transaction they make. The advantage of adapting to these channel dynamics is that we go from having to "sell" people who buy insurance, to introducing an insurance that is ready to be "bought" seamlessly when needed, which creates a scalable, sustainable business model
New Products & Servic es
COVID-19 changed customers' risk behavior, needs and profiles – both individuals and companies. Driven by these new risks, increased expectation of customer and product customization, new data sources and a new dominant group of buyers (digitally technically savvy Gen Z and Millennials), there will be an increased demand for new products and services.
For individuals, there will be an increased demand for use-based (UBI), parametric and on-demand insurance to tailor their risk to their actual behavior and needs. In particular, the demand for UBI for auto will increase when employees switch to permanent virtual work or a hybrid model that reduces driving and thus the risk. COVID-19 improves the general public's understanding of insurance and the services it provides. The result will be an increased demand for life and disability insurance for individuals.
Similarly, the continued growth of companies in the Gig Economy will increase interest in on-demand voluntary benefits, in particular disability, life, critical illness and long-term care for the periods when companies have Gig employees. With the permanent transition of the customer's business models to be more digital and flexible – such as online shopping, pick-up and delivery on the curb and more – the demand for new coverages such as cyber, umbrella and commercial car will increase rapidly. The ability to develop and launch new products in weeks versus months or years will be crucial in capturing growth opportunities.
The power of ecosystems
With the breadth and speed of change in technology, customer risk needs and commitment expectations, it is almost impossible for any insurance company to have or afford to acquire the resources and capacity needed to keep pace with change , let alone anticipate and stay ahead of them. A digital ecosystem with various third-party partner services completely removes this barrier. This powerful combination gives insurers the opportunity to quickly and easily create custom MVP products, services and experiences that they can test with different market segments and quickly start and scale if they succeed or iterate and test again if not.
As customers, employees, partners and channels transition to digital experiences, the ability of companies to become increasingly digital and agile is crucial to relevance and competitive advantage. They expect seamless interactions that meet their needs holistically, not product by product. Creating this holistic approach requires platform technologies that allow insurers to choose from a variety of controlled partner apps and connect them via APIs, and with democratized programming without code / low code, business and IT users can create new user experiences and offers. The new experience offers a single interaction for customers that eliminates friction between participants in a broader ecosystem.
Insurers can connect to these ecosystems in different ways. Using mobility as an example, insurers can create a uniform policy to cover which mode of transport a customer chooses, instead of separate policies for each. Or for life, insurers can look at life, health, wealth and well-being to meet customers' broader financial lifestyle needs. Our primary research with car and life insurance customers confirms the market potential to look at customers through an ecosystem lens and develop complete solutions that meet a wide range of related needs. Insurers need to expand their horizons to "play" in other, broader ecosystems in addition to the insurance vertical, which offers an opportunity to embed insurance in assets, activities or products in other ecosystems, creating new market opportunities for growth.
Data & Analytics Redefines competitive dominance
It's very simple: Data means something. Intelligence is important. Analytics is important. A data-driven foundation matters.
I have often talked about data as the lifeblood of blood. It is a data-driven industry, but we have not made effective use of the information we have, let alone the rapidly growing new data sources to create competitive advantages.
While insurers collect a wealth of core data, few have found a way to capture, analyze and monetize this asset. As more insurance customers interact online – by performing various tasks, such as comparing products, prices and services or buying, servicing and making payments and claims – the amount of data, both structured and unstructured, is increasing exponentially. At the same time, new analysis techniques are emerging to help insurers use data in new innovative ways.
Customers and their willingness to share new data sources with insurance companies so that they have a personal experience, tailored products, tailored prices, relevant services and meaningful, personal interactions are driving forces. In particular, the ability to support continuous warranty and service from real-time data will be crucial.
From an economic perspective, data-driven organizations see improvements of up to 20% to 30% in EBITDA due to unlocked efficiency and more detailed financial insight. [ii] By utilizing this basis, insurance companies must rapidly expand data sources from internal, transactional and historical data to new data sources from emerging technologies and market sources.
Competitive dominance is no longer achieved through operational efficiency, lower prices, massive advertising, large internal systems or channel loyalty. Competitive dominance is achieved by strategically using data and analysis to redefine business models, processes, products, services, customer experiences, markets and channels in innovative ways and lay the foundation for the future of insurance. The time for a data-driven strategy and foundation is now.
Warp Speed Leaders
As we look forward to 2021, we know that change and disruption will remain constant and continue at a faster pace. Because of this, the era of success as a "fast follower" is long gone.
Forward-looking leaders both optimize and nurture their current business and disrupt it by building their future business. In our upcoming research on strategic priorities in 2021, we found that despite COVID-19, insurance industry leaders are widening the gap between Followers and Laggards. Looking back over the next three years, leaders outperformed Followers by 28% and Laggards by a staggering 100% – up from 21% and 62% last year! Leaders focus on the next generation of platforms, ecosystems, new channels, new products and business models – all important strategies that affect and accelerate growth.
Leaders make revolutionary speed bold moves with a two-speed strategy to optimize today's business while creating future business. The result is that Followers and especially Laggards have a growing gap that is becoming increasingly difficult and expensive to break, which puts their companies at increased risk.
So the question is … do you create insurance lap speed opportunities or do you fall further behind? Your opportunity decreases. Time is of the essence.
Include disturbances and the new normal. Make the impossible … possible in 2021!
[i] Ip, Greg, “Covid-19 Propelled Business Into the Future. Ready or Not, ”Wall Street Journal, December 12, 2021,
https://www-wsj-com.cdn.ampproject.org/c/s/www.wsj.com/amp/articles/covid- 19- driven-companies-into-the-future-ready-or-not-11608958806
[ii] Gleeson, Brent, "The Benefits of Leading Data-Driven Organizational Change," Forbes, September 28, 2017, https: //www.forbes.com / sites / brentgleeson / 2017/09/28 / the-benefits-of-leading-data-driven-organizational-change / # 4550c4c35e09