How digital will insurers become? To what extent will target pricing for individuals become standard for certain types of insurance coverage? These are two of the many questions I’m discussing with insurance leaders and other ecosystem stakeholders these days.
While the greatest share of the budgets of insurers still go to digitizing the analog world, discussions about disruptive elements of digital transformations are taking place every day. Big Data and telematics are opening tremendous opportunities, but on the other hand, the traditional business model of insurers is coming under pressure.
The traditional idea behind insurance is that insured individuals cover risk by sharing it with a community or group of people. Sophisticated empirical as well as predictive models ensure that the risk taken by the insurer is affordable. But in the end, the economic principle is a very simple one: premiums paid by individuals not affected by any incident will be used to cover incidents happening anywhere in the risk sharing community. In the future, individual target pricing might change the paradigm in some insurance areas such as healthcare. Also concepts like pay-as-you-drive will substitute part of today’s traditional car insurance.
How far will it go? If we look to what has happened in the banking industry over the last years, insurers still have a way to go before becoming true digital shapers. How insurers take up this challenge surely will impact our lives. Depending on how they will digitally transform, our society itself will transform. That’s why this is a very sensitive and highly important question on which stakeholders need to act responsible. As I see it, discussions are taking place now and it will be a question of time until we’ll see a first disruptive bold move in the insurance industry.