Digitisation could unlock $1.63tn for insurance industry
A potential $1.63tn of value could be unlocked if the global insurance industry fully embraces insurtech by 2018, according to a study by digital strategy consultant Cognizant. Insurers should rethink their business models in the face of technological change driven by data, automation and artificial intelligence (AI), the report said. It found about two-thirds of companies thought their business future depended on technological transformation. "Without a data-centric approach at the core of what an insurance company does, some may struggle to unlock the trillions' worth of new value in it," said Cognizant's senior vice-president for global insurance strategy and ventures, Michael Clifton.

Study reveals:Insurance companies could unlock $1.63 trillion in revenue over the next two years through harnessing digital technologies

Insurance companies are facing unprecedented challenges and opportunities where digital is no longer just a new way to package and sell traditional concepts, but something that will redefine the industry at its core.

The massive value of today’s $5 trillion global insurance market is impossible to ignore. Add to that over $1.63 trillion worth of new value to be unlocked if the industry is digitised by 2018 - and the industry becomes even more exciting. This is demonstrated in Cognizant’s recent report on the future of work in insurance, The Work Ahead – Seven Key Trends Shaping the Future of Work in the Insurance Industry. The report is part of a larger study for which Cognizant’s Center for the Future of Work interviewed 168 insurance company executives worldwide on their digital and technological priorities, how they view the opportunities presented by digital transformation and its impact on future developments in their business.

Insurance providers, traditionally focused mainly on their core business, should rethink what they do, and how they do it, in the face of change driven by data, automation and artificial intelligence (AI).

Digital is key

According to the research, approximately two-thirds of insurers (61%) believe that digitally-driven transformation is the key to their organisation’s commercial future. The data-driven insurance industry has much to gain from working with automation and machine learning that enhances the ability to analyse and create value through data.

For a corporation, being more strategic and specialised may mean targeting a micro-vertical niche, for example, bio-chemical research intellectual property protection, rather than continuing to pursue large, undifferentiated marketplaces. Furthermore, being more automated and technical may mean reducing costs in back-office business processes through the deployment of robotic process automation (RPA). Almost all respondents agreed with the statement that “the required skills to succeed in my industry are going to change significantly in the next three years”.

As such, by 2018, there will be five major business dynamics that will materially impact the future of work in insurance:

Work will become more strategic than ever

Work will become more specialised

Work will become more automated

We will work more with machines that enhance what humans already do

Work will become more technical

In order to keep up with the competition, insurance companies should adapt to these dynamics and equip their employees with the relevant skills.

Data-based insights lay the ground for analytical skills

A significant number (68%) of insurance executives said that, in 2016, analytical skills were the most important. By 2020, this figure rises to 88%. Analytical skills will only grow in importance as businesses increasingly understand the power of data and data-based insights.

In contrast, 57% said “selling” was the second most important skill in 2016. By 2020, this figure will have remained relatively consistent and will only have grown to 61%. Respondents perceive selling remains very essential but that its importance will not grow substantially over the next few years. The ability to sell products and services will always remain relevant; however, other skills previously given less recognition, such as data analytics, are a key requirement for insurance companies, in a world increasingly driven by software.

Michael Clifton, Senior Vice President, global insurance strategy and ventures, Cognizant, comments:

“It is clear there is an industry consensus on the central role of data and analytics – both now and in the future – in shaping business models and commercial opportunities. In many ways, this is not a surprise, but the research confirms something profound: without a data-centric approach at the core of what an insurance company does and how it does it, some may struggle to maintain their current spot in a competitive industry – and unlock the trillions worth of new value in it.”