We all know that since 2019, there was an economic slowdown which was further aggravated by COVID. Insurance providers who were already working on thin margins in an overcrowded market are now more stressed to manage additional demand contractions. Moreover, rising Insurtech competitors with new-age technology solutions are coming up with a new approach to the traditional insurance business. With the advent of customer-centric e-Commerce and personalized banking, customers want more from their providers. Hence, there is bound to have a change in the insurance industry.

Adding additional services to lure customers and provide a better experience is seen as a way forward by some to sort out some challenges. In this article, I tried to explore this phenomenon further by evaluating the business model with the basics.

For any business – the ultimate golden rule is:

“Revenue is Vanity, Profit is Sanity, but Cash is King”    – Alan Miltz

To make revenue – Insurance firms need a larger market share which can come with the best product/service and settlement matrices.

But, what if the product/service offering is the same among competitors.

As a fundamental economics principle, growing competition with similar offerings will lead to commoditization and price reduction. Hence, the industry is bound to lower the prices, which means lower premium in the case of insurance. With lower premiums, the only way to make profits is by removing the inefficiencies and optimizing the operations.

Hence, over the years, companies focus on finding the right customer segments (insurance usage, income, and risk levels) for their product offerings and implement lean processes to save costs. This approach worked for some so far but cannot be a sustainable measure because of externalities impacting the industry and growing concerns over cash flows.

Moreover, With the advent of digital technologies, the focus is also on improving customer experience. Hence, firms are trying to bring in:

–         Bundling of products with additional services

–         Increase customer touchpoints

–         Focus on claims/loss prevention

The last point is intriguing and leading to a path of the extended value chain which is beyond adding some additional services for Insurers.

Claims prevention is only possible if the possibility of occurrence of the event is reduced. Such risk management is possible if all/most factors causing the event is assessed and connected logically with a causal relationship.

In simple terms, health insurance companies can be one-stop-shop taking care of personal fitness, doctor/nurse services, and regular pathology checkups. They can also fetch in data from wearable devices to recommend various wellness services like Yoga, Gym, and meditation services.

Whereas, in general insurance, they can be a single source of proactive maintenance and repair as per data received from Smart devices. Think of the situation of motor insurance, what if the motor insurance will also take care of car services, tire/battery change at the right time, and insurance premium will change as per car usage, servicing results, and driving pattern.

Such an ecosystem is not a phenomenon but a reality with the help of digital technologies. Incumbents have already started extended their services by assessing the data coming out of different insurance functions.

Alliances and partnerships are key for such an ecosystem to flourish. With technology integration, seamless customer experience is to be focused. For example – a hailstorm warning from a weather app is integrated with customer notification and proactive coating and repair recommendation with listed suppliers and repair workers to contact.

Combining loss prevention measures with insurance offerings is a win-win situation for both customers and insurance firms. Insurance firms can come closer to their customers with multiple interactions throughout the year. Customers will also get value for the money that they are spending over premiums. If you have reached this point and interested to see what I said in action.

This concept is being promoted at various levels, and the rapid development capabilities of digital technologies can bring these concepts into reality within a few weeks. Multiple digital transformation insurance deals in 2020 while the world is under COVID attack, showcasing this change. It will be interesting to watch how quickly we are entering a digitally connected world of insurance and the new business models evolving out of it.

To know more about this, please refer to the detailed article authored by me at:

Reducing the Rate and Severity of Insurance Claims through Digital Engagement