Disrupting the insurance business model for a sustainable future - Image by Stefan Keller from Pixabay Commercial sustainability is a complex area for the insurance industry, which we discuss in depth within our paper, The Future of Commercial Sustainability. In it, we discuss how the combined force of technology and insurance can address the challenges presented by commercial sustainability. Central to this is an openness to disrupt the insurance business model.

Commercial sustainability requires addressing the concerns of climate risk, supply chain risk and urban risk head-on. Furthermore, within each broad risk category, there are additional layers of risk, including the risks of sustaining innovation, operational risk, and energy transition risk. The current insurance business models are not suitable for managing these risks. The industry is ripe for and undergoing disruption, and technology is in the driving seat.

“…insurance is both in need of… and bad at change.” – Bill Pieroni

The insurance industry’s history is long but remarkably consistent with minimal change. With underwriting at its heart, insurance models have focused on selling policies to customers to cover specific risks, assessing risk to set premiums with classic actuarial science, and managing claims. Increasing focus on investment strategies has characterised the best of change over previous decades. Innovations have happened within the long-serving business models. That has built a solid industry but one which is change-averse and ripe for change.

The insurance industry must transform to meet the needs of today’s businesses and society. Insurers must act fast to adapt their organisations and services to combat new and evolving threats like climate change and cyber risks.

The good news is that technology holds the key to unlocking new potential and creating a digital, customer-focused insurance business. By embracing digital transformation, insurance companies can overcome challenges like silo-based legacy systems and new competition while improving responsiveness to customers.

The future of insurance belongs to those who can keep up with the pace of change, embrace technology, and prioritise customer satisfaction. It’s an exciting time to be in the industry, and the possibilities are endless for those willing to innovate and evolve.

Technology is the key

The insurance industry is at a turning point. Those with advanced tech capability (and a willingness to embrace this) are already seeing the benefits of agility, growth, and cost-effectiveness. However, it’s clear that digitally-centred business models are becoming necessary, and insurers must adapt or risk falling behind.

It’s time for the insurance industry to break away from incremental change and embrace a culture of innovation. Technology enables this. The future belongs to those who can adapt quickly and effectively and prioritise collaboration with tech start-ups over competing with them. The possibilities are endless for those who are willing to take the leap. The business models of tomorrow are agile, responsive and dynamic – three adjectives which hitherto would rarely be used to describe insurance!

Jacqueline Legrand – CEO and co-founder, Maptycs, commented, “Smart underwriting requires people’s expertise, a mix of curated historical & real-time data, and powerful technology platforms to combine and analyze multiple datasets better and faster. Sustainable underwriting will increasingly rely on trust and transparency between insurers, insureds, and brokers to improve risk prevention and mitigation, and to maintain economically acceptable insurance costs for organizations and the Society.”

And the business model is the enabler

In today’s fast-paced and unpredictable market, businesses must constantly adapt to ensure sustainable growth. This means embracing new practices to build flexible, adaptable, and resilient business models. Leandro Dallemule, General Manager North America, Planck, states that the modern world of risk mitigation, characterised by information gaps, will “require reliance on more trustworthy, responsible and transparent models.”

To achieve this, companies must explore real-time practices, new revenue models, dynamic exchanges, and participation in open ecosystems and networks. This requires a redesign of digitisation strategies and a reallocation of resources to outcome-centric transformation initiatives.

As a result, many companies are exploring new business models to accelerate their interactions with tech companies, estimate and create value most effectively, and deliver it to all key stakeholders involved in the value chain. Embracing change and innovation is central to success in the modern insurance and business landscape.

The value of data

Better grappling with the available data is at the heart of creating agile and future-centric business models. The insurance industry excels at holding data; modern technology will enable it to utilise the data even more effectively. Business models should reflect this. Older, larger insurance giants have a massive asset in the data they hold, and insurtech start-ups can partner with them to create a marriage of powerful data and agile adaptations.

Insurers must leverage the full potential of their data to unlock valuable insights. Proactive companies will seize the chance to revamp their technology infrastructure and liberate information from isolated silos, transforming it into actionable intelligence that can fuel sustainable growth and innovation throughout their organisation.

The trends driving the need for a business model change

Disruption is coming to many industries, driven by technology. The same is happening in insurance.

  • Customers are demanding personalised and integrated experiences
    Insurers can create business models where their services are monetised across digital ecosystems, offered as add-ons to other services or products. There’s a continual feedback loop here with technology driving a rise in customer expectations. The insurers that can meet these expectations will thrive.
  • Traditional business models are not working
    Industry profits are waning, and new business models that leverage tech present an enormous opportunity for reinvigorating growth, and profitability.
  • Tech businesses are making waves within insurance
    Insurance companies must choose to change their business models because tech innovators are forcing it from the outside. It’s best to be a willing participant in the inevitable change. Tech innovators are driving change based on their strengths of cutting-edge tech but also analytical insight, strong customer relationships and digital-ecosystem competency. They can launch new solutions fast. Those insurers that embrace partnerships with these tech innovators will do best, as in the example of the collaboration between Swiss Re and Google’s Verily in the creation of Granular Insurance.

Effectively, the trends above create a radically different market requiring substantially different insurance business models. The future business models that will result in success include multiple elements. Ecosystem and platform-based businesses with a sharp focus on direct customer relationships and interaction will lead the way. Additionally, integration with tech players is necessary to create agile, robust and efficient business models capable of scaling as the future unfolds.

How business model shifts look will vary according to niche and size. Large insurers have the benefit of scale, skill and data strength and can become enablers. Smaller insurer companies can focus on their inherent agility, customer focus and flexibility.

Learn more about the sustainable future of insurance

Insurers must act now to secure the tech capabilities they need to ensure their business models will enable a sustainable future. Find out more about the role of disrupting the insurance model, data, analytics, ethics, and responsible underwriting in our paper, The Future of Commercial Sustainability.

Alchemy Crew VENTURESAlchemy Crew customizes R&D and Commercialization Labs to fast- solve some of the most pressing challenges within the insurance and finance sectors. Using open innovation, ecosystem thinking, and digital experimentation, Alchemy Crew collaborates with established market players to speed the curation, validation, and commercialization of emerging technology ventures and de-risk partnership and investment activities. Our ultimate goal is to industrialize and democratize corporate venturing techniques to ease multi-party deliveries of long-term sustainable unfair advantage.  The team works with leading insurance players, including Cigna, Nissay, Travelers, and Zurich, to name but a few.


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