Reimagining Insurance Business Models: The Digital Lifestyle Insurer And Connected Insurer

Rakesh Shetty

Despite rapid technology innovation, the vast majority of insurance is still sold the way it has been for decades: old-fashioned, face-to-face meetings between brokers and clients. That’s finally changing. Shifting customer demands, fintech disruptors like MoneySuperMarket, and new technologies (such as smart sensors that help assess risk and medical-grade wearables) are forcing insurers to change business models – or risk being out-competed and out-innovated. Half of all insurers say that new, more nimble competitors are already disrupting their business models, reports KPMG.

In the midst of this disruption, two new insurance models are emerging: the Digital Lifestyle Insurer and the Connected Insurer.

Digital lifestyle insurers focus on the customer segment of one

From wearable fitness trackers to home monitoring, our contemporary lifestyles have gone digital – and consumers are demanding that insurers keep up. Today’s insurers have unprecedented opportunities to apply digital tools and data to create services that enhance and fit into their customers’ digital lifestyles.

The Digital Lifestyle Insurer follows a customer-centric business model that relies heavily on customer profiling, micro-segmentation, and individualized products offered in an omnichannel environment. This model supports customers’ increased connectivity with the world around them. Insurers that succeed with the Digital Lifestyle model do the following:

  • Focus on the “segment of one” to leverage customer knowledge, anticipate customer needs, and present highly personalized offerings at the right moment.
  • Address young buyers by investing in social media, contextual marketing, and interactive needs analysis.
  • Introduce innovative products and services that offer seamless customer support through each phase of the insurance life cycle.

Connected insurers offer new products and services through a business network

The Connected Insurer model offers cross-industry connectivity in a networked economy through collaborative business relationships. Connected insurers co-innovate with their business network and technology partners to create new products and services, generating new and increased revenue streams. The ability to adapt this platform with agility can change the way insurers look at and are looked at by partners. Connected sensors and data analytics also allow companies to provide customized, next-generation experiences for consumers.

A vertical network serving a single market, such as travel or labor, is valuable. A vertical network that connects to other vertical networks in real-time is revolutionary. This networked connection can only be accomplished through cloud-based services that connect millions of partners and process data in real time. Networked companies are more likely than their peers to have increased sales, higher profit margins, and be market leaders, according to McKinsey.

Next steps: Collaborative partnerships power insurance model innovation

Innovation takes more than just a “big idea.” The right partnerships, processes, tools, and infrastructure are essential. Insurers without the right foundations for innovation will “struggle to compete in this era of exponential change,” according to KPMG. A strong innovation foundation also requires formal strategies, dedicated budgets, clear objectives, and clear metrics. Companies that succeed “create partnerships to develop the right products and services to meet current and future demand.”

To learn more, please download our our whitepaper “How Insurers Can Prepare for the Digital Revolution.”

Rakesh Shetty

About Rakesh Shetty

Rakesh Shetty is the Head of Marketing for Strategic Industries at SAP responsible for financial services, retail, public services and telecommunications sectors. Mr. Shetty has worked in the software industry for over 18 years in a variety of roles delivering enterprise software solutions with assignments in Asia, Europe and the United States.