The insurance industry is facing major technology changes that can make the consumer experience simpler and more intuitive. These changes create major growth opportunities for insurers and innovative third-party providers that will be able to adopt an agile business model. Insurers that reinvent their consumer engagement models, digitize distribution and operations, and embrace big-data analytics will lead the industry.
While some aspects of technological change are shared across industries, several challenges are specific to insurance. In a joint, two-part research analysis conducted with Morgan Stanley, BCG identified several areas insurers should watch.
Consumer Engagement. Our global survey suggests that. They would like a simpler, more direct relationship with their insurer.
Digitization. “Digitally born” insurance models can gain an advantage over traditional models, reducing expenses by as much as 10% of premiums and claims by as much as 8%.
Disruption. The Internet of Things, big data, and the ability to access broader ecosystems will have a dramatic impact on the insurance industry along the entire value chain. New models will potentially change the nature of risk assessment and management, as well as the consumer engagement model.
Investment. There are opportunities for technology players as insurers invest in digitization. The major challenges, we think, will be in consumer channels and new data sources. Investment will also be needed in core systems to enable digitization and cut costs. Vendors exposed to these areas are expected to have strong growth.
Ecosystems. We believe growing consumer expectations for tailored and sophisticated products, and the rapid adoption of technology, such as the Internet of Things and big data, will drive the need for insurers to cooperate with other businesses to deliver novel products and services.