Beware: Non-Insurers Are Eying the Insurance Space
The greatest competitive threat to insurers may not be other insurers, but rather, noninsurance companies. As technology and digital capabilities proliferate, the insurance space is opening up to a number of new types of players, such as Web businesses, car manufacturers, and utilities.
That’s one of the key takeaways of a new report out of Morgan Stanley and Boston Consulting Group. BCG analysts Michael Niddam, Jean-Christophe Gard, and Jonathan Koopmans caution that “insurers that fail to adapt to the shifting environment are in peril of being marginalized as mere providers of capital for shrinking risk pools.”
The new competitive landscape is the result of digital “ecosystems of companies, individual contributors, institutions, and consumers that interact in new relationships to create combined services and mutual value,” the BCG team says. That’s because many of these non-insurance partners will be building their own relationships and brands with insurance customers.
Devices and big data are at the core of many of these emerging new ecosystems. For example, some telecoms are allying with car manufacturers to provide constant data streams on the state and usage of their vehicles. The original intent was to reduce maintenance costs, but this is also valuable information for insurers as well.
Does this mean telecoms will suddenly decide to become P&C insurance carriers? No, but the alliances they forge could potentially make or break the fortunes of existing insurers. These “’adjacent’ players (operating in industries with high-customer engagement) are well positioned to embed insurance cover in the products and services they sell.”
The report’s authors foresee competitive threats emerging across three key areas of the insurance business: distribution, underwriting, and claims management.
The insurance companies thriving in this environment, Niddam, Gard, and Koopmans state, will be those that intelligently partner with adjacent industry leaders. They cite some current examples of insurance industry partnerships across the globe:
Bought By Many (BBM) is a UK-based site that employs big data to match consumers with specific (and often hard-to-find) unique insurance products from participating insurers.
Alibaba, a large online and mobile commerce company, supplements its offerings with financial services from an affiliate, Ant Financial. In 2013, Ant Financial set up an online insurance company which provides protection for merchandise return shipping.
Tokio Marine partnered with NTT Docomo, a telecom provider, to provide unique short-term insurance products through apps, such as one-day auto insurance policies.
Insure-The-Box, a UK-based insurance company, teamed up with Toyota to offer telematics-driven auto insurance, awarding discounts based on driving habits or time of day driven.
British Gas launched a line of home insurance products tied to maintenance assurance, as well as promoting smart home technology.