As announced in my preview post last week, the IBM Institute for Business Value has just released our main insurance study for 2018, titled “The platform fueled-future: New ways to differentiate in a changing insurance industry.” This study is based on a global survey of 1,000 insurance executives, with questions centering on insurance platforms about participant readiness, platform benefits and the role platforms will play within the insurance industry. Of the 1,000 respondents, 32% were classified as outperformers based on the dual criteria of premium and operational efficiency.¹
To summarize the study in one sentence: Platforms have arrived – and they are another emerging technology, or rather a set of technologies, that will change the insurance industry going forward. While that change will be disruptive in the broadest sense, this disruption is less about changing the face of insurance – something that I think is less likely and/or dramatic than many commentators on emerging technologies would have us believe. The change, and thus the value of platforms, will largely be in two main areas:
- For B2C, platforms will expand market access and customer experience for insurance companies. Suddenly, insurance companies can be easy to do business with.
- For B2B, platforms will be about freeing insurance companies from the mundane business of administrating insurance policies. This allows them to focus on the central role of insurance – managing, mitigating and pricing risk.
In our view, insurance platforms will enhance the trend towards an “insurance market of two speeds,” with adopters on one and non-adopters on the other side.
While most insurers, both average and outperformers, said they were willing to join an existing platform, the enhanced value will come from providing intellectual property of some kind to a platform. This latter mindset seems to be the domain of outperformers, as the following graphic shows:
In fact, more than 50% of outperforming insurers in our survey say they expect more than 10% of their revenue to be from platforms in the next three years.
With platforms taking over most of the “easy” tasks of insurance, the question of how to differentiate suddenly becomes more pressing, and the study offers some insights into an insurers’ thought process. But, rather going into more detail, I invite you to read the study itself. It is freely available from the IBM Institute for Business Value, along with many other interesting studies (of course, I am biased), of which I will highlight and recap a few over the next few weeks on this blog.
¹The respondents have been asked to self-rank themselves compared to their peers. While that introduces a certain amount of bias, this bias seems to be uniform in the same direction; to test this in previous studies, we compared our survey answers with objective measures of growth and efficiency such as CAGR of GPW and cost ratios. The correlation we found to the self-reported data points was very high.