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An increasingly digital world offers insurance carriers the ability to grow their addressable markets – and their revenue. But that depends on insurers transforming into “living organizations,” defined by Accenture as “agile, flexible organizations with fluid business and operating models and an obsession with maximizing their relevance.”

In a recent report, “Insurance as a Living Business: Explosive Growth,” Accenture says that insurance industry revenue can grow by as much as $177 billion worldwide in the next five years, thanks to digital technology increasing access to insurance products, as well as the development of new products. In addition, existing insurance spend is up for grabs for companies that respond quickly and nimbly to macro trends, to the tune of about $198 billion.

“The total that is accessible to living businesses is therefore $375 billion,” Accenture writes. “Our analysis indicates that insurers that retain their faith in the traditional business model, in preference to transformation, will contribute the bulk of this in the form of forfeited market share. This is likely to be offset only by the normal expansion of the market, as they will be able to benefit minimally from the new business opportunities.”

There are models for such transformation in other industries, which mostly revolve around helping customers use their time and resources more efficiently. Accenture highlights how cruise operator Carnival distributed medallions to its customers, which connect to sensors to offer personalized recommendations on thousands of screens around the ship and sense when a person is returning to their room to re-activate the climate control. And Michelin launched its sensor-driven EFFIFUEL initiative to help truckers manage fuel costs by monitoring fuel consumption, tire pressure, temperature, speed, and location.

“The Internet of Things and other digital technologies are likely to transform insurance by replacing pooled, historical data with individual, real-time data for risk assessment and pricing,” Accenture says. “They also create the opportunity to use this data for other services than just insurance – services that large commercial customers have been willing to pay for, and that insurers are now able to offer affordably to medium and smaller customers.”

Insurers will have to adopt five key characteristics to become living businesses, Accenture explains, which follow.
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1. Targeting the desired value roadmap
Insurers need to think strategically about what opportunities are credibly available within their product and transition into targeting those opportunities, Accenture says. But that doesn’t mean jumping in with the newest and hottest thing immediately, the consultancy warns.

“A more logical, sequential approach is better advised. Develop the capabilities to realize the opportunities that currently exist, and when these have been effectively scaled and have become sustainable, start to target the ecosystems and new risk exposures that will take you to the next level,” Accenture writes.
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2. Designing living services
The insurance products of the future should be responsive to customer data in real-time, especially leveraging AI and analytics technology, Accenture says. The shift from using historical data to using real-time data to understand risk will be a defining characteristic of living organizations.

“These living services will wrap around customers, constantly learning from them about their needs, intentions and preferences,” the report says. “Living services will talk to them, help them and even entertain them – a far cry from traditional insurance services.”
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3. Building and iterating intelligent platforms
The platform on which all these efforts will be built has to reflect the digital moment. That means employing cloud and API services, as well as Agile development techniques, in the IT organization, Accenture says: “By fostering an iterative mindset, you can manage big data in ways that optimize the customer experience across digital and physical channels.”
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4. Connecting to diverse ecosystems
The most effective insurance products of the future will have to fit into an entire suite of services employed by customers that make the most of digital connectivity. Accenture suggests insurers partner with the so-called GAFA organizations – Google, Amazon, Facebook and Apple – to “gain access to large pools of potential customers, create an environment, services and experiences that are more appealing than you as an insurer alone can do and together create a formidable alliance to drive profitable growth.”
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5. Sustaining a fluid organization
All the macro trends around digital will influence the kind of workforce insurers employ, as well. Carriers will need to hire data scientists, tap into freelancers to scale up quickly and even use automated labor like artificial intelligence. Insurers should also use DevOps approaches to system rollout,” Accenture recommends.

“Fostering innovation and entrepreneurial skills is critical to finding new, relevant ways of engaging with customers. Extending the talent pool beyond employees, contractors and consultants to include specialists – especially in key technologies – using crowdsourcing and on-demand sources will significantly enhance your agility,” the study says.