Long-standing insurance providers face an increasing threat from non-insurance companies as revealed in a recent report conducted by The Economist Intelligence Unit and sponsored by SAP SE.
"The Way Forward: Insurance in the Age of Customer Intimacy and The Internet of Things" looks at technology trends in the insurance space, uncovering a competitive threat from e-commerce companies and banks offering insurance services that are more customer-centric. Traditional providers are combating this threat by improving their use of analytics and incorporating data from machine-to-machine (M2M) and the Internet of Things into their services.
The study included extensive desk research, in-depth interviews and a quantitative survey of 338 C-level executives at life and property and casualty insurers from around the world. According to the findings, insurers have struggled to keep pace with other industries that have more advanced consumer-facing capabilities, such as mobile apps or 24×7 online support forums.
This has created an opportunity for non-traditional insurers to come in and challenge traditional providers in their own backyard. When asked which non-insurance entities they fear the most over the next ten years, 32 percent identified e-commerce providers such as Google and Amazon, 31 percent named banks which have been slowly edging into insurance and 11 percent felt large retailers posed a significant threat.
"Traditional insurers have to become customer-centric to battle back against the real threat these companies pose to their business," said Gilda Stahl, senior editor, The Economist Intelligence Unit. "The good news revealed in our research is that insurers have started to make real progress on that front."
Insurers sit upon a wealth of rich customer information but have been unable to extract business insight from all this data. New innovations in Big Data have turned things around for insurers as they have become more systemic and methodical in how they use this information. Privacy concerns from consumers are less prevalent now, particularly when insurers are successful at familiarizing end-users with the way their products use anonymized or "de-identified" data.
Overall, 86 percent of insurers confirmed they are more effectively utilizing Big Data and analytics. This consisted of 82 percent obtaining more data from external sources, 80 percent making greater use of predictive analytics, 75 percent using data to better price products, 76 percent making data analytics readily accessible to more people in their organization and 51 percent identifying customer targeting as the most frequent benefit from leveraging analytics. Insurers are showing a real commitment in using analytics to boost their core competencies in risk, pricing and underwriting.
The importance of analytics will lead to more innovative applications and usage, none more so than in the area of M2M telematics and connected devices in the Internet of Things. Insurers have made progress satisfying security and privacy concerns around this data and have started to use it to enhance underwriting and improve their loss-control services in commercial insurance.
M2M solutions also offer more and better information on a wider variety of risks than have ever been captured before. This new wealth of data presents a unique opportunity for insurers to change their pricing, risk evaluation and underwriting models to benefit customers who are looking for companies to respond to their needs.