Consumers Will Make Rules For P&C, Life Insurers Going Forward: Gartner

Property and casualty (P&C) and life insurers will face a very different market during the next 10 years as shifting market conditions bring new rules for competition, according to Gartner, Inc. These market shifts will continue as new regulations are introduced, consumers continue to evolve, new competitors enter the market, and new management practices are introduced. It is imperative that insurers can quickly respond to these changes, and do so in a cost-effective manner.

Consumers will make the rules as they increasingly turn to the Internet to buy insurance, opening the door for new, more customer-centric competitors to enter the market. Analysts predict that many large insurers will find it difficult to reduce operating expenses to compete against new competition and these large insurers will be slow to respond to shifting market conditions.

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“Consumerisation and digitalisation are two of the biggest business strategies among insurers in 2012,” said Kimberly Harris-Ferrante, vice president and distinguished analyst at Gartner. “Both represent massive change in business processes and technologies. Responding to consumer change and using digital technologies to improve operations are essential in meeting emerging and future market requirements. Embracing both concepts will allow insurers to evolve to better match customers, sales, and regulatory pressures.”

Harris-Ferrante said consumers will increasingly adopt mobile technologies, become more social and technology savvy, have shifting requirements for convenience, demand personalised communications, engage in more channels, and express a different view of insurance brands.

“Insurers need to better understand the evolving consumer market and build strategies on how to respond. They must adopt new business processes and technologies to better compete, respond to market conditions and control operating costs,” said Harris-Ferrante. “Digitalisation will provide insurers with the electronic and interactive capabilities required to meet future business needs.”

Because of the intersection of consumerisation and digitalisation companies must embrace the Nexus of Forces, which includes four key elements: social, mobile, cloud and information.

“P&C and life insurers must adopt all four in order to improve operational efficiency, improve customer relationships, drive revenue, improved customer service quality, and improve competitiveness in their target market,” Harris-Ferrante. “The most successful insurers will leverage these concepts will help insurers transform during the next five years to better meet market conditions.”

Social is a critical element in how insurers will communicate with agents and customers, obtain business intelligence, market, service customers, and improve customer intelligence. In the short-term, insurers are using social media for social marketing, fraud investigation, catastrophic response, lead generation and quoting. Longer-term, social insurers may emerge, social platforms may become agents, consumers may use social platforms for the first notice of loss for claims, and insurers may build social workplaces to interact with.

Mobility is also becoming core to the insurance industry. Companies must support mobile device use with distributors, employees, service supply partners, consumers and policyholders. Making decisions on how to best to deploy mobility, however, is complicated and insurers are struggling with decisions around the best ways to finance the technology, build the mobile platform, handle device security, and build strategies for mobile applications.

To fulfill future insurance business needs, companies need to more aggressively leverage their data assets as well as look to new data sources for additional value. Building business intelligence (BI), analytical, and predictive capabilities will be essential in market success through 2017. Increasingly insurers are using new technologies which provide real-time data to assist in understanding risks, support new products, and support claims. Advancements in telematics are projected to continue through 2017 as more insurers launch telematics-based auto insurance and move to pay-how-you-drive insurance.