Understanding Your Objectives
There is a wealth of opportunity across commercial insurance and we are just getting started. As the industry begins to grasp the magnitude and scope of the pending changes, leaders must address several topics as they navigate this brave new world.
One challenge is the lack of tacit knowledge that comes from operating in an industry where norms and working practices are well known. We find ourselves in a world amassed in technology and with precious few clues about what customers might want, which products and services they are likely to buy and how the industry will evolve. Current management practices that emphasize careful and deliberate decision making within a mature environment provide little help.
The phase of change dictated by technology and reinforced through clients’ expectations calls for a culture of learning, experimentation, and testing. It is easy to be paralyzed by the vast number of choices available and resort to doing nothing. This is dangerous. Digital technologies and data speed up change and provide early adopters with scale and momentum. Being a fast follower is less effective in an environment where, as Ernest Hemingway wrote of going bankrupt, things happen “gradually and then suddenly”.
We recommend approaching the challenge with a bias for action, realizing the element of “we don’t know what we don’t know.” Success will depend on developing a strategy for where to play and how to win. Organizations must inform their strategy by creating focused learning opportunities and co-create with their clients.
1: First, Identify Use Cases
With your company’s strengths as a starting point, identify use cases that can be tested in partnership with clients. Find the right problems to solve, considering customer segments, current product and service offerings, loss histories and their root causes, the availability of data sets from sensors and other sources and potential technology options. Use case identification is best done in a multi-competency setting that includes roles such as actuaries and claims representatives.
2: Next, Condust Focused Proof-of-Concepts (POCs)
Select technology vendors and design an MVP (minimum viable product) that can be tested in market trials. A POC should test the technologies and processes involved, link to business value, and help understand the viability, desirability, and feasibility of the product offering. Further, the POC should provide insights into how to scale and address usability and adoption.
3: Lastly, Pilot and Commercialize
With learnings from the POC, develop a production ready product that can be deployed in a focused pilot. Build business capabilities, craft a go-to-market strategy, and evolve the business to scale based on market feedback.
Partnerships will take on a newfound importance within this environment. While startups have a crucial role to play, the complicated regulatory nature of the commercial insurance market and its very complex and entrenched distribution model will necessitate working in a hybrid model.
The right way forward will depend on each company’s starting point:
Insured: Look for opportunities with IoT data that has been captured as part of on-going asset performance management, smart meter tracking, fleet management, etc. Most enterprises have yet to tie operational data to risk indemnification. Collaborate with brokers and carrier partners to identify use cases.
Broker: Focus on areas of specialty and strength. Leverage extensive client base and market reach to proactively identify and pursue innovation opportunities.
Carrier: Leverage the wealth of insights that are found within the organization, particularly data that can help predict loss events. Existing carriers have a unique advantage within their core product areas – if they can unlock it - where they can bring expertise from underwriting and claims to identify and mature use cases and direct technology requirements.