How could social media and web technology change the insurance landscape?
The digital disruption that has transformed the travel, publishing, entertainment, retail and banking industries, is also affecting insurance. Christy Zhou reflects on this in her 2015 Aon Benfield Scholarship submission.
Social media and web-based technologies are changing consumer behaviour and business models around the world.
A well thought out digital strategy is important as the balance of power has been shifting to consumers due to the rapid adoption of internet, smartphones, social media and aggregator websites1. Consumers’ and businesses’ insurance needs remain largely unchanged as decades ago, but their behaviours have changed radically: they now routinely use the Internet to inform, compare, buy and interact with insurers2. The consequence of this is increased consumer expectations, price and product competition, as well as declining customer loyalty.
This essay begins with a brief history of technological developments in the last century, suggesting the world is entering a new wave of IT transformation, characterised by social, mobile, analytics and cloud technologies, collectively known as SMAC3. The essay then explores changes that are currently underway:
- First, it looks at the upside of social media and the implications of new business models such as P2P4 insurance funded by the likes of Guevara5. It then considers the idea of the sharing economy6, and its relevance for insurance.
- Then, it looks at web-based technology companies such as Google and Alibaba and their adjacency in the insurance industry, highlighting implications and opportunities for insurers.
Despite the disruptive forces, the essay argues that there are opportunities amidst this changing environment. Social media and web-based technologies can assist with product development, reduce distribution cost and improve underwriting and risk assessment. This will in turn improve the performance and underlying profitability of the business and give technology enabled insurers a competitive edge.
The essay concludes with a call for innovation in a world of disruptive change. It suggests digital technology opens up doors for those who are prepared to evolve and thrive.
Read Christy’s full essay submitted, in which she was the runner-up in the March 2015 competition.
1 Insurance aggregators are more successful in UK, less so in US and Australia
2 “For insurance companies, the day of digital reckoning” – Bain & Company, March 2015
3 “SMAC and the evolution of IT” – Computer World
4 P2P: Peer-to-Peer
5 Others include: FriendsInsurance, iMingle, Bought-By-Many and InsureMyFriend
6 Examples include: Airbnb and Uber
CPD: Actuaries Institute Members can claim two CPD points for every hour of reading articles on Actuaries Digital.