\u201cYou never change things by fighting existing reality.\u00a0 To change something, build a new model that makes the existing model obsolete.\u201d<\/p>\n
Buckminster Fuller is often hailed as “one of the greatest minds of our times” for his comprehensive perspective on problems within the world and as a pioneer in the design of innovative technology solutions that envisioned and imagined a new future. This quote of his encapsulates what leading insurers and InsurTech startups are doing \u2026 building a new insurance business model that embraces the new technologies, customer expectations and shifting market boundaries necessary to succeed in the Digital Age.<\/p>\n
Majesco\u2019s new primary research report, Strategic Priorities 2018: The Digital Insurance 2.0 Gap<\/a>,<\/em> provides a strategic lens into the industry with regard to Digital Insurance<\/a> 2.0, generating key questions the insurance industry must ask.\u00a0 Are we acting on the rapidly emerging digital age gaps and leveraging our knowledge of the insurance industry and market trends<\/a>?\u00a0 Are we maintaining our existing reality of Insurance 1.0 or are we building the future of Digital Insurance 2.0?\u00a0 Are we simply educated observers or are we positioning ourselves as new digital leaders?<\/p>\n Interestingly, the trend of companies that reported higher levels of growth in the past year were also much more likely to have been developing new business models, new products, expanding channels and replacing legacy systems continued in 2018, areas that build the foundation of Digital Insurance 2.0.<\/p>\n However, gaps between today\u2019s reality and Digital Insurance 2.0 are hindering insurers\u2019 ability to move forward.\u00a0 And this year, we see new fissures emerging, represented by the expanding gaps in today\u2019s market reality from multiple dimensions:\u00a0 knowing \u2013 doing gap, digital strategy gap, business \u2013 IT gap, and large \u2013 midsize insurer gap, adding to the customer expectations and generational gaps highlighted in our most recent consumer<\/a> and SMB<\/a> research.<\/p>\n Knowing \u2013 Doing Gap<\/strong><\/p>\n We identified this gap in 2017, reflecting the differences between what insurers know, what they are planning, and what they are actually doing.\u00a0 We saw overall year-on-year improvements in each of the Knowing, Planning and Doing categories, but unfortunately the overall Knowing \u2013 Doing Gap remains relatively unchanged<\/em>.\u00a0 In particular, in the Doing category, a number of highly disruptive technologies with significant implications to insurers had little focus.<\/p>\n This continuing trend indicates that the industry has increasing and considerable work to do to eliminate this gap in a time of rapid change, as we move from Insurance 1.0 to Digital Insurance 2.0.<\/p>\n Business – IT Gap<\/strong><\/p>\n We have talked about the business vs. IT gap for decades.\u00a0 Over the last decade, the gap seemed to decrease as we modernized our legacy systems, which enabled the business to more rapidly make changes without depending on IT.\u00a0 However, this year\u2019s survey highlights that the gap is growing once again, driven by the need to respond more rapidly to growing and shifting market opportunities.<\/p>\n Business and IT share similar levels of awareness about internal and external challenges. However, the business leaders place a much higher priority on strategic initiatives that focus on growth and innovation, including developing new channels, products and business models. They are also more concerned about the growing array of business and technology trends that are redefining the industry, often through new customer expectations, demographics, emerging technologies, and InsurTech competition.\u00a0 In stark contrast, IT is more concerned about the Budget and Security, reflecting the challenge of keeping the existing business running while building the business for the future, often with the same budget parameters.<\/p>\n The gaps between IT and Business pose critical issues that insurance leadership must respond to. Both Business and IT leadership must agree to transform the way their organizations interact and collaborate, in order to accelerate their shift to Digital Insurance 2.0. They must work together to differentiate the business through test and learn and rapid delivery of innovative business solutions that leverage internal, partner and ecosystem expertise, relationships and technologies.<\/p>\n Large – Mid-market Gap<\/strong><\/p>\n We often look at large insurance companies as having more complexity, making it more challenging for them to change, yet having the resources, both people and funding, to act on opportunities.\u00a0 Conversely, smaller insurance companies are often nimbler and able to act on opportunities, yet often do not have the resources to take advantage of opportunities. Is this reality?<\/p>\n Internal challenges receive higher levels of concern from larger insurers, reflecting their complexity.\u00a0 Only security and budget garner equal levels of concern between the two segments.\u00a0 When it comes to external challenges, the contrast is even greater, with most areas ranking higher for larger insurers; regulatory changes is the only common issue for both segments. The lower levels of concern for these external challenges highlight a very internal focus for mid-market insurers, a significant blind spot and risk to their organizations.\u00a0 This disparity between large and mid-market insurers highlights the real risk of mid-market insurers\u2019 ability to understand, plan for and shift to Digital Insurance 2.0.\u00a0 The lack of response will likely result in increased competition, decline in customer retention, limited growth and growing irrelevance within a fast changing marketplace.<\/p>\n The results appear to indicate that larger insurance companies are leveraging their strength in resources, both people and funding, to act on the market changes. Conversely, mid-market insurance companies are not acting on these changes, likely due to their more limited resources. Regardless, every insurer must leverage their strengths to address these areas, based on their own unique business strategies, to shift to Digital Insurance 2.0 and ensure future growth. Being a fast follower will no longer be an advantage with the pace of change we are experiencing. Preparing for and embracing the changes by knowing, planning and doing is more important than ever.<\/p>\n Digital Strategy Gap: Truly Strategic, or More Tactical?<\/strong><\/p>\n Across all survey respondents, developing and implementing a digital strategy was the third-highest priority strategic initiative. This is encouraging, as a digital strategy is at the heart of the Digital Insurance 2.0 business model. However, experience has shown that a digital strategy<\/em> can mean very different things to different people and organizations.<\/p>\n Unfortunately, many still think of it in terms of disparate tactical tools like portals or mobile apps, which can simplify and streamline individual processes, but do not substantially change how the business works.\u00a0 A true Digital Insurance 2.0 business model requires a fundamental re-imagining of the business\u2019 purpose, and how all of its components work to accomplish that purpose, encompassing processes, technology and people.\u00a0 Deeper analysis of the survey respondents who rated digital strategy as a high priority suggests that there are strategic vs. tactical gaps in their digital views, particularly between Business and IT.\u00a0 This gap could become the \u201cAchilles heel\u201d for insurers, impacting their ability to shift to the new market dynamics that will define the next generation of market leaders.<\/p>\n Bridging the Gaps<\/strong><\/p>\n Each day we see the early signs of Digital Insurance 2.0 emerge \u2026 new products introduced, new channels established, new services offered, new business models launched, and much more.<\/p>\n It\u2019s a whole new game in insurance.\u00a0 The combination of digital technologies, new competitors with vastly different business models, products and economics, and customers (both consumers and business owners) who are rapidly embracing digital engagement approaches and are open to new, innovative products and services, are poised to disrupt, disaggregate and dislocate the insurance industry\u2019s traditional Insurance 1.0 business model, long based on strong brands, agent channels and portfolios of traditional products.<\/p>\n This year\u2019s strategic priorities survey results clearly show that insurers know<\/strong> and recognize the industry is changing.\u00a0 And while there appears to be more planning and doing<\/strong> as compared to last year, the Knowing \u2013 Doing Gap remains relatively unchanged.\u00a0 At the same time, new fissures have emerged, most notably the Business \u2013 IT gap.\u00a0 Together these gaps are placing insurers at risk, putting them in a \u201cholding pattern\u201d rather than in a \u201cforward moving\u201d fast-paced race to the future.<\/p>\n In a \u201cwinner take all\u201d digital world, rethinking decades-long business assumptions and traditional business models is mandatory. Survival and winning will require architecting and building a Digital Insurance 2.0 business model that will make today\u2019s obsolete.\u00a0 Getting out ahead of the curve is more important than ever, before the crevice is too large to overcome.<\/p>\n Insurers must overcome competing priorities and continuous external change as they make the paradigm shift, before the digital gap becomes too great.\u00a0 Continuing as fast followers by investing in only select strategic initiatives and digital capabilities that support their existing business models and different parts of the value chain (a project \/ bottom up approach) will not close the gap.<\/p>\n Insurers must make transformation to Digital Insurance 2.0 a priority to reenergize their organizations through innovation and growth strategies. These efforts will build a bridge to traverse the gaps while positioning them to capture the revenue growth presented by a market shift that will define a new ecosystem of market leaders.<\/p>\n As R. Buckminster Fuller stated \u201c\u201cWe are called to be architects of the future, not its victims.\u201d<\/p>\n Are you an architect or a victim of the future?<\/p>\n","protected":false},"excerpt":{"rendered":" \u201cYou never change things by fighting existing reality.\u00a0 To change something, build a new model that makes the existing model obsolete.\u201d Buckminster Fuller is often hailed as “one of the greatest minds of our times” for his comprehensive perspective on problems within the world and as a pioneer in the design of innovative technology solutions…<\/p>\n