A few years ago, insurance experts began foreshadowing the impending digital disruption that would leave a wake of innovation in its path.
See also: Accelerating change through innovation
With the rise of InsurTech and non-traditional players entering the space, it's clear that "disruption" is here.
However, if traditional players learn from their new counterparts, and continue to foster a culture of innovation across their business, "disruption" does not have to be disrupting.
For new entrants and traditional carriers alike, here are five trends to watch over the coming year:
1. Ensuring innovation with InsurTech
More than just a buzzword, InsurTech, the application of technology to traditional insurance practices, is impacting stakeholders across the industry.
Safe, low-mileage drivers are seeing lower premiums thanks to growing telematics programs. Claims frequency has been impacted by sensors and "dashcams," and companies such as Allstate and State Farm are partnering with drone start-ups to assess roof damage — circumventing the dangers of climbing ladders to get the job done.
Agents are also riding the InsurTech innovation wave. Many can now submit applications via web portals, which not only facilitates the underwriting process, but also increases agent productivity. Others are testing "chatbots" to streamline the lead generation process and free up time for tasks that require more personal attention.
While these innovations have the industry abuzz, there are still many uncertainties associated with new technologies. As such, intuition and anecdotes can only get decision-makers so far in deciding which (if any) of these ideas are right for their business.
In order to proactively manage the uncertainty that comes with introducing a new technology, insurers should first pilot these services with a small group of policyholders or in select markets, to gauge whether they generate enough incremental benefit to justify the substantial upfront costs. These pilot programs can also help insurers identify unforeseeable issues with implementation and address them before broader rollout.
Peer pressure and competition can be powerful motivators for insurance sales teams. (Photo: iStock)
2. Give the people what they want: Refining product portfolios
While at the core, the idea of insurance is simple, insurance policies themselves often prove perplexing to policyholders. Individuals may not understand all the fees, premiums, coverage and allowed amounts available; the terminology alone can often prove intimidating.
As new entrants, such as Metromile and Lemonade, gain a following with their simpler offerings, we expect more traditional players to explore ways to refine their product offering, fee structures, and marketing to compete. For example, USAA recently invested $24 million in Automatic Labs, a telematics platform that claims it will "connect your car to your life" and provides a full suite of integrated apps. Others are exploring new products in response to collaborative consumption services, like Uber, Airbnb and Task Rabbit.
Introducing these offerings inevitably requires navigating the complex web of disparate state regulations and directives. Yet, many leading insurers have found the silver lining in these situations — framing the initial introduction in select markets as an opportunity to gauge interest and financial impact. By accurately and rigorously analyzing these introductions, insurers can gain insight into how the new line impacts existing lines, which individuals it attracts, and in which other markets the product may be profitable.
Insurers must examine data to determine how agencies benefit from carrier interaction. (Photo: iStock)
