In line with venture capitalist Marc Andreessen’s 2011 proclamation that “software is eating the world,” it may be appropriate to also add the corollary that “software is eating the insurance business.”
That's the gist of a post from Matteo Carbone, principal at Bain & Company, who asserts that the insurance sector is undergoing a profound change. Digital transformation has become a major challenge for insurance companies all over the world.
In his native Italy, he notes, telematics installations became an integral part of 15.5% of new policies and renewals during the third quarter of 2015.
For more proof, Carbone adds, follow the money. The insurance technology category “has seen investments of almost $2.65 billion coming in during 2015 compared with $0.74 billion in 2014.” The companies succeeding in this category are focusing on developing industry solutions around platforms and roles for various players across the insurance value chain. Companies from outside the traditional value chain, aside from carriers, agencies and brokers, are making their presence felt. An example may be telecommunications providers, who are designing and deploying the in-vehicle or in-fleet telematics systems that insurers are now embedding into their offerings.
“The lines between the classical roles of distributor, supplier (coming even from other sectors), insurer and reinsurer are getting blurred,” says Carbone. “In a scenario like this, the balance of power (and consequently the profit pool) among various actors is bound to be challenged and each one of them may well choose to collaborate or compete depending on context and timing.”
The key to managing and succeeding in this new era of digital insurance will be partnerships and ecosystems that extend well beyond the boundaries of insurance. This means working closely with established tech providers, as well as startups with new ideas. It may also mean collaborating with established companies outside the insurance sphere as well – perhaps a company such as GE, with its Predix real-time sensor systems for engines and equipment, could play a role. It’s noteworthy that GE, long considered a heavy equipment and appliance manufacturer, is now a huge player in the software business as well.
It’s only a matter of time until insurance companies emerge as software companies as well.
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