The Policy Is No Longer The Center Of The Insurance Universe (Here’s What Is)

Bob Cummings

Let’s face it: When most people think of an engaging customer experience, insurance probably isn’t the first thing that comes to mind.

The insurance policy has been the center of the insurance universe for a long time. For most of us, when we sign a policy, we put it in a drawer and hope that we don’t have an accident. If we’re lucky, we may never need to contact the insurer.

So, what is changing?

Insurance has traditionally been about compensating you for a financial loss. However, it hasn’t been able to prevent the loss itself. Having insurance doesn’t prevent your car from crashing or your house from burning.

But with the advent of the Internet of Things (IoT), it is suddenly becoming possible for insurers to actually help you prevent loss.

And it’s not just insurers. New players from other industries are entering the insurance market and offering real loss-reduction services that are capable of monitoring and influencing our daily lives. Many insurers suddenly find themselves having to put the customer in the middle of the universe, rather than just the policy.

The insurance business model is going to change more in the next five years than it has in the last 350.

New players prompt new interactions

The next generation of customers may expect a lot more from their insurance companies. As The New York Times recently illustrated in an article spotlighting how technology is changing insurance, tomorrow’s insurance customer is likely to crave a customer experience across multiple channels.

Insurers are likely to become intimately involved with customers’ lives through their devices at home and on the go. The partnership between State Farm and the home security company ADT is a good example of this.

Of course, some companies in related industries may even want to forego partnerships with insurers and enter the market directly. For example, in the automotive sector, many companies are looking at ways to automate different aspects of driving. That can open up a whole new realm of potential liability for these companies, which may prompt them to shoulder the risk themselves. Plus, many new entrants are finding that entering the insurance market is less of a risk and more of an opportunity.

The chatter from the boardrooms

Right now, most insurance companies don’t have systems that are designed to operate across networks in a way that is conducive to creating new digital offerings.

In the boardroom, CEOs are looking to their top management to figure out new business models, implement best practices, enable new services that can integrate with existing networks, and do all of this in a way that can function across a distributed workforce.

Of course, overhauling everything at once isn’t always practical. There is a need to create new products that “orchestrate” insurance and non-insurance components in a Big Data environment.

What else may be on the horizon for insurance? Every few months we are surprised by a new business model popping up in different parts of the world. The InsurTech startups are coming up with exciting new models as are other non-insurance players.

Will traditional insurance disappear? I doubt it, at least not in our lifetimes. But it is in for a significant shakeup. It has relied historically on a purely mathematical abstraction of physical reality. In the future, insurance will need to connect to real-world physical behavior in order to do what we all want: reduce risk.

For more information, please visit us at SAP for insurance.

Bob Cummings

About Bob Cummings

Bob Cummings is the Head of SAP’s Industry Business Unit for Insurance, responsible for SAP’s offering to insurance companies. He is a 20-year veteran in the SAP business, both with SAP Partners and, since 1994, in international roles at SAP. Bob was one of the original founders of the SAP Industry Business Unit for Insurance, which led to building-out an end-to-end insurance suite.