Why insurance is uniquely vulnerable to disruption
A new study from Accenture looked at the potential for disruption across key industries, and insurance is considered to be in the midst of a “vulnerable” period, meaning disruptors are knocking at the door, but the industry, as a whole, is not prepared for the oncoming challenge.
The company’s latest “Disrupability Index” paints insurance – along with banking, health and utilities – as ripe for disruption. They find some common elements, such as incumbents benefitting from “the continued presence of high barriers to entry, such as regulatory and capital requirements.” However, the Accenture researchers add, “our analysis of companies in this period revealed weaknesses in operational efficiency and innovation commitment.”
The best approaches to overcome such vulnerability? Productivity, innovation and technology for starters, the researchers state: “Companies need to attend to structural productivity challenges in their core business. To arrest impeding demand and profit compression, companies need to learn to spot and scale up innovations, for instance, by leveraging technology and data to build enhanced services and offerings that alleviate customer pain points.”
A way to approach this may be through “an innovation architecture using innovation hubs and labs,” Accenture recommends. This may be described, in the authors’ terms, as “scale the new,” meaning look to new approaches and innovations to build future business opportunities.
The Accenture study analyzed more than 3,600 companies with annual revenues of at least $100 million in 82 countries along two dimensions: current level of disruption, and susceptibility to future disruption. Overall, almost two-thirds (63 percent) of companies currently face high levels of disruption, and two-fifths (44 percent) show severe signs of susceptibility to future disruption.
Disruptors do what they do in three ways, the Accenture team adds:
· “They dramatically lower historic prices through new cost structures.”
· “They deliver significant innovation in products and experiences for consumers.”
· “They break down incumbent defenses and barriers to entry.”
Is your company seeing such players in the market? Or are you supporting or launching a venture that follows these tenets?