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How to disrupt the high-tech disrupters

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Technology-driven “disruptive innovation” — innovation that results in new products, services and markets and that threatens the business models of industry incumbents — is much on minds of top executives at life insurers these days.

And for good reason: Technology giants like Amazon, Apple and Google have driven long-established companies out of business or to the brink of extinction. The life insurance business, once thought impervious to such upending, could be next in the tech titan cross hairs. 

The question is, are life insurers ready for the high-tech onslaught coming their way? And, more to the more point, what are they doing to survive and thrive in a rapidly changing market that is already experiencing the effects of disruptive innovation? 

Related: DOL fiduciary rule: Disruption or opportunity?

Accenturea global professional services company, sought answers to these questions in a new survey of chief strategy officers, both CSOs residing at insurers and their peers in other industry sectors. The report, “2016 CSO Survey: Insurance-Key Insights,” polled 561 CSOs (and those in equivalent roles) in 10 industries and 11 countries. Target companies, including the 12 percent of respondents classified as insurers, have revenue greater than $1 billion. 

Chief among the report’s sobering conclusions: Most CSOs are cognizant of technology-based threats; and most also count themselves as less than well prepared to meet those challenges. The report specifically finds that: 

  • 80 percent of global chief strategy officers (CSOs) and 84 percent of insurance CSOs agree that new technologies have “rapidly changed their company’s industry” during the past 5 years. 

  • 93 percent of CSOs at global companies and 94 percent of CSOs in insurance agree that new technologies will “rapidly change their industry” in the next 5 years. 

  • Fewer than 1 in 5 CSOs at insurers (18 percent) believe their companies are prepared for sudden industry disruption to “a very large extent.” Globally (excluding insurers), the proportion is nearly the same (20 percent). 

An overarching theme of the study is that incumbents across industries — not least among them insurers — cannot face technology-driven disruption by themselves. To compete with disrupters seeking to take market-share, they must work with partners — tech-start-ups, technology labs and incubators, and others active in the “fintech” and “insuretech” spaces — that offer complementary skills sets and resources.

Related: 21 emerging risks for the insurance industry and global economy

“Insurers and other incumbents in other sectors can’t face disruption alone,” says John Cusano, senior managing director-of insurance at Accenture.

“Insurers and other incumbents in other sectors can’t face disruption alone,” says John Cusano, senior managing director-of insurance at Accenture. (Photo: iStock)

A word to wise: Don’t go solo.

Industry incumbants, including insurers, “must engage with new technologies and new companies to meet the challenge,” says Accenture’s John Cusano. “That may entail organizational changes to be more collaborative and open.” 

Related: 4 reasons income annuities might be the retirement equivalent of Airbnb

Such changes would come none too soon. Life and P&C insurers, he added, have been buffeted as never before by a “massive movement” or ratcheting up in customer expectations driven by tech giants like Amazon, Google and Uber.

Beyond the behemoths, insurers are confronting a wave of technological change, much of it fueled by innovative seed-and early-stage fintech companies that are receiving millions of dollars in capital from Silicon Valley-based venture capital firms. 

To be sure, forward-thinking insurers are not sitting on the sidelines. Many have kick-started their own venture capital arms to leverage promising new technologies and add to their bottom line. 

In the last few years, several major carriers — American Family, AXA, Transamerica, MassMutual and USAA — have joined the venture capital fray. And, to Cusano’s point, they’re not operating solo. Oftentimes, multiple insurers pool capital in tech companies that are developing mutually-beneficial solutions. 

Here’s a prime example: AXA Strategic Ventures, MassMutual Ventures and Transamerica Venture are backing Policy Genius, a New York-based firm that provides an online platform for people to buy several types of insurance including life, disability income, renters and pet insurance.  

The site includes an “insurance checkup” feature to determine how much coverage an applicant needs. Prospects can also get a quote, access educational resources and complete an application online. 

Cusano notes that many insurers with venture capital units are also starting innovation and incubator labs in Silicon Valley labs to gain a head start with promising new technologies.  

“We see that a lot of insurers are really picking up the pace in terms of not facing disruption alone and are leveraging new capabilities and tech companies in the market,” says Cusano. 

These and other technology-driven initiatives, he adds, are representative of best-of-breed companies determined to harness — and not be undone by — forces that could upend their industries. Seeking to uncover commonalities among these companies, the CSO survey identified a number of shared priorities. 

Companies that report a greater readiness for industry disruption, for example, are “much more likely” than others to collaborate on a range of business activities. Among them: marketing, product innovation, customer relationship management, distribution and business process outsourcing. They’re also more likely than less disruption-ready businesses to “have advanced these partnerships” during the past 5 years. 

Related: What genetic testing means for life insurers

Collaboration is key in the technology race.

Today’s best-of-breed companies collaborate with ”ecosystem partners.” (Photo: iStock)

Team up for success.

The types of “ecosystem” collaborators that are enabling today’s integrated companies to compete on the technology front including advertising agencies, direct competitors, logistics providers, suppliers and retailers.

Related: Bringing long-overdue innovation to a premium pricing model

One example in the life insurance space: an initiative that John Hancock Financial unveiled in April 2015 in partnership Vitality Group, a provider of incentive-based wellness programs. The co-branded program avails policyholders of opportunities to save on their annual premiums and earn rewards and discounts by taking steps to improve their health.  

A signature feature of the program is a free Fitbit, the popular wireless fitness wristband that tracks the policyholders’ number of steps walked, quality of sleep and other health metrics. 

The device transmits that information to the insurer. The data, when combined with other health-related activities, earns “vitality points” for the policyholder.  

These points, in turn, can be redeemed for rewards (e.g., retailer discounts). Depending on the insurance contract purchased, customer can also cut their annual premium by up 15 percent — a potentially significant sum over the life of a policy. 

“This is great example of how you can pair new technology with a different company using that technology to provide a value-added solution to clients,” says Cusano. 

The value-add extends to solutions (another focal point of the Accenture report) resulting from collaborative work on research and development and innovation initiatives. Case-in-point: Prudential Financial’s rollout in December 2015 of 10- and 15-year term life policies to a community that (in the U.S.) had been largely shut out of the life insurance market: people living with HIV

The product unveiling stems from an unusual partnership with Aequalis, an independent organization that conducted extensive research into the feasibility of availing the HIV community of life products. In addition to providing data underpinning the unique launch, Aequalis also manages the application process on behalf of Prudential and its agents. 

Rollouts like those of Prudential and John Hancock, says Cusano, typically involve, and are often spearheaded by, top-level executives at life insurers that have been tasked with implementing technology- and innovation-related initiatives. Given their high-level positions within the C-suite, they’re also able to sell these initiatives to the one individual whose opinions count the most: the chief executive officer.  

“The companies that have put in place chief digital officers and chief innovation officers and who report directly to the CEO tend to have a dedicated focus on technology-focused initiatives,” says Cusano. ”That’s a sign that they and C-level peers are taking technology-disruption seriously.” 

See the charts beginning on the next page for additional highlights from Accenture’s 2016 CSO survey. 


Aequalis: leveling the playing field for those living with HIV

8 tech trends that will change how carriers to business

How life insurers must adapt to an omnichannel world: Part 3

Digitizing the insurance process – are you ready?

Nearly 9 in 10 CSOs are prepared for industry disruption to a “very large extent” and will continue to invest in industry platforms to meet the challenge. (Source: Accenture’s 2016 CSO survey. Click on chart to enlarge.)

Just 1 in 7 CSOs polled by Accenture view their conpanies as “high-valiue achievers,” as defined by benefits derived from 6 of the platform investments noted below. (Source: Accenture’s 2016 CSO survey. Click on chart to enlarge.)

Fewer than 1 in 10 CSOs at insurers - half the percentage of Accenture’s global sample regard their firms as “high-value achievers.” (Source: Accenture’s 2016 CSO survey. Click on chart to enlarge.)

As shown here, insurers are, by most measures, keeping up with their global peers in shifting their strategic focus away from their core industry, as measured by 7 practices. (Source: Accenture’s 2016 CSO survey. Click on chart to enlarge.)

Insurers are also generally keeping pace with global peers in “significantly” rethinking business strategies, except by one key measure: integrating carrier offerings with others in the value chain. (Source: Accenture’s 2016 CSO survey. Click on chart to enlarge.)

As to collaborative partnerships, insurers are, by some measures, surpassing Accenture’s global sample by “significantly” growing and maintaining such alliances. (Source: Accenture’s 2016 CSO survey. Click on chart to enlarge.)


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