Are digital ecosystems the future of insurance?
The insurance industry stands on the precipice of a paradigm shift.
Digitisation is accelerating at pace, with new and innovative technologies, the greater use of data and a mobile-first approach not only changing how the industry operates, but also how customers expect it to operate.
So too is the competitive landscape changing the playing field for those incumbents in the industry, forcing them towards a better defined, service-based approach similar to that being adopted by many of the larger players in the financial services industry.
According to research by Accenture that analysed close to 20 industries, insurance is among those most susceptible to future disruption.
Accenture explained that, by 2022, carriers that are slow to respond to digital - or ‘hyper-relevant’ - competitors could suffer market share erosion close to $200bn and miss the opportunity to pursue new growth activities worth $177bn.
For insurers to deliver on the technology innovation needed will require the nurturing of digital ecosystems that sees traditional insurers join forces with new, innovative insurtechs.
According to McKinsey, digital ecosystems are already emerging in several sectors worldwide, such as healthcare and finance, driven by the increased use of digital technologies by consumers and the realignment of global markets into one, connected whole.
It explains that there are three key values derived from being an ecosystem player:
- They can be gateways that reduce friction for customers wishing to switch between related services, to not toggle between different portals or log-in networks.
- They harness network effects
- They integrate data across several different services, thus providing better and more personalised solutions to customers.
Accenture, in its The Ultimate Guide to Insurance Ecosystems report explains that “if insurers fail to create their own ecosystems, they run the risk of being limited to the role of a pure risk cover provider.
“Other players may then be in a better position to provide a more nuanced and valuable customer experience, to impose their brand, and to own the customer relationship.”
It is recognised that ecosystems have the potential to open several new revenue streams. They also allow insurers to take up different roles depending on the nature of the ecosystem
A successful ecosystem strategy could, for example, provide opportunity to enter new or emerging market sectors.
It may also allow for faster scaling of business models than if an insurer was working alone.
TrueMotion insurtech acquired by Cambridge Mobile Telematics
One of the world’s leading telematics insurtechs, Cambridge Mobile Telematics, was launched in 2010 and powers 65 enterprise programmes in 28 countries.
Meanwhile, TrueMotion, which launched in 2012, has enjoyed significant success as a telematics operator, raising US$10mn in its seed funding round in 2010, and then partnering with the motor insurtech Noblr in 2019.
TrueMotion has also entered the European market, collaborating with LB Forsikring to promote safe driving in Denmark.
The joining of the companies means TrueMotion’s 150-strong workforce will join Cambridge Mobile Telematic’s already established team, along with their client list, which includes Travelers, Farmers, and Progressive.
The new company will focus on increased interest in using telematics for crash reconstruction in personal lines claims and more innovation in the telematics space.
Speaking about the acquisition, William Powers, CEO, and co-founder of Cambridge Mobile Telematics, described the move as an opportunity to explore new markets, expand throughout the US and bring telematics to a much wider customer base.
"With this acquisition, we will use our world-class talent, technology, and scale to help our partners overcome the complex challenges of global road safety,” he added.
Ryan McMahon, VP of insurance and customer affairs for Cambridge Mobile Telematics, explained that expanding the company with additional talent and customers would help meet the demands of a growing telematics market. He also quoted data from a study by J.D. Power which revealed that personal auto telematics users have doubled in five years to 16% of policyholders.
McMahon told the press, “This market is rapidly expanding, and building more capabilities is more important than ever,” McMahon says. “Both companies follow similar philosophies and grew up in similar ecosystems, and now we’re bringing those cultures together.”
He continued, “Telematics is absolutely the future of commercial auto and rideshare, and it’s kind of a step up beyond the normal telematics."
McMahon added, “We will not only widen our lead in smartphone telematics, but also use our combined talent to invent new products for risk measurement, contextual telematics, and crash mitigation across emerging mobile, IoT, connected-car, video, and sensing technologies.”
Five reasons why telematics is in demand
- It reduces fuel costs and increases operational efficiency. This is a consideration for most commercial fleets given the rising costs of fuel
- The technology enables fleet managers to plan operations with greater precision by providing exact locations, timescales, and speeds of vehicles.
- It improves driving standards and monitors driver behaviour, reducing detours and ensuring responsible driving.
- It helps fleet health and maintenance by monitoring the health of operational vehicles.
- It increases corporate social responsibility in terms of care for the driver, the vehicle, the impact of driving in terms of emissions, and also the security of the vehicle itself.
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