The global pandemic has impacted every industry, compelling organizations to evaluate new business models to improve their resilience. Technology is often at the core of transformation strategies, but this may pose a unique challenge for the insurance sector. According to consumer research presented at Livefest, the insurance industry is rated near the bottom for innovation and struggles to engage customers via digital channels. With innovation and digital engagement among the top needs of the hour, how can insurers quickly turn the tide, embrace transformation, and capitalize on an Insurtech space that clocked $4.4 billion in revenue till 2019? An open insurance platform may hold the key.
Open insurance platforms enable organizations to accelerate their technology adoption and deepen their integrations with Insurtech startups. These new platforms, similar to Open Banking, empower companies to leverage some of the core open standards like security and FCA guidelines to maximize the use of an Open API ecosystem.
Many private communities are driving open-standards initiatives. Indeed, some insurers who were mature in their digital adoption extended their offerings before COVID-19 by leveraging an open insurance platform. Yet these successes were not industry-wide. As market demands evolve quickly amid the pandemic, the insurance industry would benefit by reimagining the open insurance platform for a new normal. Doing so could also save large insurers millions of dollars in Capex investments by enabling them to tap into a broader ecosystem of Insurtech capabilities.
A Reimagined Open Insurance Platform: Driving Innovation at Pace
The post-pandemic situation is causing insurers to reimagine their development strategy for products and services. From digitizing the ecosystem to enabling product rollout, insurers are forced to work more like startups. This new ground may require setting up innovation labs to test new solutions and make quicker decisions, it may drive more competition, or it may increase collaboration. Either way, it will certainly drive better offerings and lower prices for customers.
But these changes must happen quickly, both to navigate the current business climate and to reverse the perception that innovation is slow in the sector. That’s where reimagining the open insurance platform comes into play.
Leveraging standard APIs in this manner can improve customer-service strategies by unifying communication across channels and offering contactless service in a socially distanced world. It can also help create new solutions, reaching untapped customers with customized and affordable products. At the same time, a reimagined open insurance platform should empower insurers to deliver empathy-driven customer service with a host of new offerings.
Reinventing Products and Services
Large insurers understand that to remain competitive, they must incorporate elements of the Insurtech space or build partnerships into their strategic plans. For example, Zurich Insurance hosts an annual “Zurich Innovation” event in which they invite Insurtech companies to present fresh ideas that align with their strategy. Winners are given an opportunity to create a proof of concept.
Leveraging such partnerships can bring about both innovation and financial benefits. For example, if insurers combine their product flexibility (e.g. microinsurance, insurance on-demand, peer-to-peer insurance) with new services (e.g. subscription-based pricing, usage-based pricing, or peer-to-peer insurance models), they may be able to reduce their financial risk. And, if those innovations are then made available to aggregators via Open APIs, insurers could bring their products and offerings to entirely new end customers.
Aviva Health Insurance created a customized plan and app to help individuals lead healthier lifestyles. These personalized health tips, workplace fitness challenges, and incentivized offers delighted customers while also contributing to Aviva’s strategic goal of reducing health-insurance claims.
Similarly, advanced and immersive technologies – often considered tools of startups alone – need not be ignored by large insurers in these reimagined scenarios. Virtual Reality and Augmented Reality, for instance, can empower insurers to perform assessments and conduct home wellness checks virtually without incurring travel costs or forcing patients to leave their home. AI, Machine Learning and IoT can also be leveraged to transform the value chain, to help insurers make quick risk assessments while underwriting, to make faster decisions during claims settlement, and to empower customers with self-service via intelligent chatbots.
Leverage Open APIs for Innovation at Scale
APIs and apps are key to enabling marketplace adoption and thus achieving a broader impact. Yet using apps and APIs has far greater potential impact than scale; insurers can also use them to maintain their role as a value-creating entity or to explore new paths as a value-exchange entity. Integrating insurance APIs into emerging and flexible ecosystems can generate new revenue streams across Insurtech, reinsurers, distributors, and brokers – presuming all players embrace a standard open insurance platform.
Value creation services can be based on targeted segments like Life, Property, or Auto, with the insurance marketplace targeting development and exposing APIs for consumption. Value exchange services, meanwhile, enable insurers to host and consume the Insurtech ecosystem’s apps/APIs rather than developing such capabilities themselves. In this context, insurers would be value exchange entity in the marketplace.
Digital Insurers are changing the competitive landscape by tailoring products based on data analytics, providing subscription-based offerings, and offering an on-demand omni-channel customer experience. Maintaining relevance amid this competition is critical, and open APIs can make the functionality much easier to deploy.
Likewise, the speed with which Insurtech companies can bring products to market and act on dynamic customer demands compels large insurers to adapt. Incumbent larger insurers can actually leverage these new-age services, complementing their own offerings with Insurtech services in a partnership model, helping ensure they remain at the forefront of the innovation conversation.
And, as new technologies such as AI, blockchain, virtual reality, IOT, and intelligent automation open new possibilities, insurance processes can be more easily transformed with an open insurance platform and a trusted technology partner who knows how to leverage them.
The COVID-19 pandemic has caused every organization and sector to rethink its strategies for resilience and growth. Not known for innovation, the insurance industry has a unique opportunity – and challenge – to rise to the occasion with new products and services. These considerations, when coupled with significant reductions in IT budgets, make it the ideal time to reimagine the open insurance platform. The associated process efficiencies and cost savings can be critical for insurers as they seek to experiment with new solutions, explore new partnerships, and remain relevant and competitive in the “new normal” market.