Udi Ziv, CEO at Earnix, the advanced analytics solutions provider for the global insurance sector, shared some thoughts on the future of datadriven insurance business.
Udi, how do insurers need to reinvent existing business models to follow customer needs?
Insurance has always been a data-driven business, but new forms of data and new ways of processing them are disrupting past business models. For example, with the take up of telematics and IoT, current insurance product offerings will be revolutionised by usage-based pricing that can accurately assess and price the risk on an individual level. Add to this changing consumer expectations, where providers are expected to have an understanding of their customers and be able to predict current and future needs, insurers must reinvent their product lines and how they market them to be customer-centric at a level previously unseen. All of this is enabled by these new forms of data and exponentially more powerful means of analysing it, for example AI and machine learning. Companies that can adopt these skills and go-to market approach will be able to excel in today’s market.
What TOP-3 the most crucial shifts / trends do you consider for the insurance industry this year?
After many years of investment, digital transformation focused on operational efficiency continues to drive change within the insurance industry. The next horizon we see is “Customer-Centric Digital Transformation” which takes the concept of personalisation to an entirely new level, to include not only customer engagement, but the ability to personalise product offerings based on the individual’s risk factors. Consider global technology leaders like Amazon, Netflix, Google and Apple and their levels of personalised customer experience, and apply that to the financial services industry. Unlike most other industries, financial products often have a cost and profitability based on the individual’s risk factors, Customer-Centric Digital Transformation uses advanced analytics to personalise the relationship between financial institutions and customer, not only for better engagement, but also for better profitability.
Related to this is the need for speed in a world that is dominated by online real-time customer interactions. Financial institutions are seeking ways to upgrade their systems to operate in this environment, however are held back by the risk and cost associated with replacing core systems and don’t have the liberty of time. To overcome this, financial institutions are seeking innovative ways of adding real-time capabilities to their IT landscape, enhancing their current systems by adding new real-time capabilities for the most critical customer-facing interactions. This strategy enables leading institutions to not only keep pace with customer preferences but compete with fintech disruptors.
Also part of this transformation is the emergence of data-driven enterprise, using deeply embedded analytics powered by AI and machine learning and integrating these with core systems to produce a new level of customer insight. These systems will be able to understand how to price risk on a one-to-one basis with surprising accuracy, and therefore will significantly change the products and distribution processes offered by the financial services industry. The integration of AI and machine learning into real-time production systems, which can apply these advanced analytics at hyperspeeds, will provide the competitive edge to early adopters.
What insurtech companies will become acquisition targets?
Analytics is a top priority for senior management in the financial services industry. Fintech and insurtech companies that can effectively harness new data and new ways to process them will attract funding and become acquisition targets.
While the past few years have seen great activity and investment in companies that renovate core operations in order to reduce costs and speed up processes, the next phase will be focused on customer engagement. Insurers need to be able to provide the kind of experience that consumers have come to expect from technology leaders. For financial institutions this means deep seated analytics that can customise risk-based products for each individual customer.
What is the biggest problem traditional insurers are being challenged?
Established insurance companies are being challenged in many ways, whether it is the ability to transform their operations to meet the demands of a real-time digital world, or the fintech/insurtech community finding opportunities to disintermediate and disrupt, there are multiple forces challenging the market place status quo.
Time-to-market is the biggest challenge insurance companies face today, because the scale of the changes necessary and the time it will take do not jive with marketplace realities. Whether it be systems changes, distribution changes, or even changing business models, change is needed now, and large traditional insurance companies must find ways to address these issues quickly.