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Insurers must transform digitally to fight off disruptive rivals

eith Stonell, Managing Director EMEA, Guidewire Software

The successful insurers of tomorrow will be those that can adapt best to a new competitive landscape that the traditional players in the market no longer have to themselves, a specialist in back end software for the insurance sector has said.
“Traditional insurers no longer shape the expectations of their customers,” commented Keith Stonell, Managing Director EMEA with insurance software developer Guidewire Software. “Expectations are now shaped by the experiences of ordering products from Amazon, connecting with friends on Facebook, and streaming video on Netflix. In parallel, insurtech players are flooding into the market. They hope to disrupt the insurance industry by introducing technologies that can fulfill customer needs at scale in a more agile manner than incumbent insurers.”
Stonell said that in response, many insurers like Axa, Aviva, and Allianz have chosen either to invest in, or collaborate with insurtechs: “We see that too much speculative capital is pursuing too few unique opportunities and so believe that many insurtechs are set to struggle over the long run,” he forecast. “As such, investing in, partnering with, or acquiring an insurtech must only be one element of a broader strategy of digital transformation.”
Stonell said he believes that tomorrow’s winning insurers will adopt a two-pronged strategy: “On the one hand, they can start modernising current offerings through smart user experiences powered by digital and data capabilities, such as offering personalised, self-service options for current customers through their preferred platforms and channels,” he added. “Secondly, they will address unmet needs with new digital services. For example, expanding from risk-transfer products to protection and prevention services powered by smart devices and artificial intelligence, or using big data and predictive analytics techniques to create personalised offerings targeted at incredibly well-defined groups of customers.”
Insurers who achieve this, he said, will greatly outperform their compatriots by ‘disrupting in’, which he said is also known as becoming a Digital Attacker: “Becoming a Digital Attacker offers established insurers the opportunity to build all-digital businesses that act with the agility and aggression of an insurtech which, if successful, offer market-leading performance,” he added. “Unsuccessful projects also bear little risk, in that financial and reputational risks are contained. Insurers who want to adopt a Digital Attacker strategy need to follow a blueprint that distills the common elements and best practices we observe from across the industry. First, business leadership must be aligned on their disruption plan, comprising a vision for delivering high-quality, low-cost insurance that is unique in the market. Second, starting with easy wins that build momentum, insurers need to iteratively build, roll out and optimize an increasingly wider scope of offerings until customer needs are met.”

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