Insurers risk being left behind if they fail to adapt to changes to traditional business models brought about by disruptive technology and shifting customer demands over the next decade, EY warns.

The industry faces challenges from societal megatrends, technology advancements, climate change, and intensifying competition from new and traditional players, EY says in a report that identifies eight “next wave” market scenarios that may impact in 5-10 years.

“Every insurance company in the region, including those in Australia, will be feeling the effects of these disruptive scenarios playing out in their market,” EY Asia-Pacific Insurance Sector Leader Grant Peters says.

“Insurers should ask themselves if their business model is ready, if they’re moving fast enough to outpace their competitors, and if they have done enough to mitigate the risks.”

The report says streams of data from connected devices will drive “real-time risk visibility” for customers and insurers, while direct and digital channels will increasingly dominate the mass market.

Incumbent insurers will also see more non-traditional providers seeking to capture business.

“The market entry of tech giants seems inevitable," EY says.

"The main questions are what form it will take and when it will happen. Insurance leaders are more likely to collaborate than compete directly.”

Insurers will need to deal with the loss of revenue streams from traditional auto policies due to ride-sharing and driverless vehicles, but there will be opportunities to find new ways to provide protection for the sector.

“The upside is particularly high for commercial insurers that can provide fleet management and tracking, proactive maintenance and other supplementary services,” it says.

Cyber risks are also presented as a major opportunity, but also a key concern as many in the industry believe a cyber catastrophe is inevitable.

EY says industry leaders dealing with changing markets are likely to team up with partners that offer specialised and complementary services, while laggards are tipped to move slowly into the cloud ecosystem and offer underwhelming customer experiences.

The report envisages that the “subscription revolution” will affect the industry with a heightened customer centricity requiring more personalised products which fit with lifestyles and key life events.

The use of artificial intelligence is forecast to accelerate in claims handling, with early adopters just scratching the surface now with the use of mobile apps, aerial drones, chat bots, predictive models to identify fraud and instantaneous electronic payments.

EY says the number of people involved in claims will fall dramatically, with personnel focused in key areas where required.

But it forecasts for firms that take the initiative, the end result will be a pleasant claims experience that quickly reimburses losses, increases loyalty and strengthens trust.

“These scenarios highlight more than ever that insurers need to focus on the evolving needs of their customers and how customer needs will continue to change into the future,” Mr Peters says.

 

 - insuranceNEWS