However, that is not to say that technology will not transform the market in profound ways. Nor that it is not seeing accelerated competition from purely digital market players. 

Incumbents must choose to disrupt their own offerings or face disruption from outside sources. A first step will be leveraging new partnerships and ecosystems to boost their digital transformation.

By Pravina Ladva, Group Chief Digital & Technology Officer, Swiss Re

In nature, an ecosystem consists of different organisms which interact in and with a common environment, all depending on each other to survive and thrive.  Ecosystems are constantly evolving and subject to periodic disruptions by internal and external factors. As the general concept of insurance itself is also forced to evolve or even disrupt given the increasing availability of real-time data, incumbents are starting to adapt – moving from being data-enabled to data-led. Taking a bold approach towards digital transformation is necessary to shape the future of the industry. While data used to be static, in a world of artificial intelligence, the competitive advantage will belong to those with the best innovative capacities. 

The rise of computational power, networked devices, changing consumer behaviours and the explosion in the amount of available data have led to new digital marketplaces that are changing the way insurance policies are bought and understood. This has led to the creation and growth of purely digital market players as new competitors to the established industry leaders.

Rather than posing a threat, this evolution offers huge potential to leverage collaboration with ecosystem partners which in many cases do not have an obvious link to the insurance sector. 

Ecosystems need healthy “co-opetition”

To be successful, ecosystem partnerships must enable seamless digital customer journeys. This requires an end-to-end view. With ecosystems becoming more and more prominent in our industry, they increasingly provide the bedrock for embedded insurance, one of the most exciting ideas of recent times. And it is easy to see why. By using digital technology and data to create better underwriting models, we can improve customer experiences, marketing effectiveness, risk selection, pricing and unit economics. 

Such seamless collaboration is a prerequisite to ensure the level of agility the insurance industry needs to adapt to rapidly changing environments and dynamic customer behaviour. In short, now is the time for “co-opetition,” where partners compete and collaborate simultaneously – of course, all in line with competition law considerations.

This also requires rethinking how we view customers. In an ecosystem, customers never “belong” to a single organisation, but rather to the entire network. By leveraging such ecosystems, insurers can compensate for a lack of direct customer touchpoints and gain data to understand and address needs more efficiently and effectively. Non-insurance partners can enhance their offerings by incorporating insurance coverage in a way that boosts loyalty and deepens their relationship with their customers. 

From protection to prevention

If we think even bolder, digitalisation and collaborative business models are also enabling the current paradigm shift in insurance offerings with a stronger focus on risk prevention and mitigation services, instead of traditional pay-outs after an event has occurred. How? First, such models are far better able to capture, analyse and understand the risks customers face, helping mitigate them. Second, with real-time insights and end-to-end visibility, insurers can advise and guide customers, while also incentivising more risk-averse behaviour. 

However, it is important that such data-driven and AI-enabled insurance solutions are covered by agreed industry best practices to guide the responsible and ethical use of data for the benefit of end customers and society. Such technology will only reach its true potential if we gain the trust of customers, regulators and other stakeholders.

For all the excitement about what’s possible with digitalisation, let’s not forget that progress depends on talented people who dare to leave well-trodden paths, challenge traditional approaches and who try again after failure. It will take very connected minds to realise the full potential of digital technologies – with their inherent cyber risks, and ethical implications – for the benefit of society at large.

Not all disruption happens on the surface. While there is far more road to run, technology is transforming the insurance industry and the opportunity to harness this still exists for both new and incumbent players. As such, all parts of a successful insurance ecosystem play a vital role in not only keeping it alive, but making it thrive.