Future trends and the insurance industry

Yesterday I travelled to Genève to partipate in the "Insurance Vision Day" arranged by the standards organizations of ACORD and UN/CEFACT in conjunction. The day was focused on discussing future global trends and the effect on the insurance industry and the role standardization could play in this.

The day was kicked off by futurist David Smith who gave his insight into some of the future trends and how he saw the possible effect on insurance. Later, Jürgen Heck, Program Director, Europe for ACORD gave his perspective from an insurance point of view.

"Customer-ization"
Actually this was a headline identified by the breakout group I participated in. The headline covers several unique trends all pointing to the fact that customers are becoming much more informed and is going to demand services (seemingly) tailored to them. The web 2.0 savvy customer do not only require 24-7 service at the fingertips, but is likely to expect insurance companies to cater for exactly his/her needs and offer products and services matching this. Obviously this will require much more than a corporate web site, and even possibly include offering outside normal insurance products. On my way home in the plane I happened to read about an actual example from Sweden, where the bank Nordea now is offering their young customers free music download besides their normal banking products. Much like TDC in Denmark is bundling music download as an integral part of a broadband mobile or ADSL subscription. For sure the new insurance customers must be met where they are being Facebook or other similar social networks. Apple already has some success selling insurance for their devices on Facebook. Perhaps we will soon see the first social network of people to organize their own “self-insurance”, perhaps all they need is someone to administrate and underwrite it… food for thought.

The aspect of catering to the customers need was not on the top of the list for ACORD members when asked by ACORD what the most important issues they were facing were. In fact, many other issues were brought which to me indicated a more internal view on things. Issues such as increasing sales, reducing costs, talent attraction and more were considered important. I personally believe the #1 issue for insurers should have been providing the best customer/user experience on the market. Simplicity when interacting with customers is the key to success. This requires the right products, the right communication, the best service and the right underlying technology to manage it all. The interesting thing is that the Insurance industry is one of few industries which have absolutely no physical goods as part of the business model. Everything can be digital, which in my mind shows a huge potential for improvement but also exposes a general lack of invention in the industry or willingness to exploit these opportunities.

The Islamic community
In a not so distant future (I forgot the actual year) it is predicted that as much as 25% of the European population will be muslim. This will for sure have an impact on the products and services delivered and those which can be acclaimed to be Halal (allowed according to the Islamic laws). Within insurance the ability to deliver takaful insurance (complying to the islamic rules for how to offer insurance) is a yet unrealized opportunity. This is obviously on top of the rest of the islamic population throughout the rest of the world. Just today in the radio I learned that a French burger chain has tremendous success opening new burger restaurants offering burgers strictly based on Halal meat…unfortunately for insurers this is not “merely” about defining a new product, but will impact the entire operation of the insurer and require a solution to match those demands (e.g TIA).

Standards
So what role does standards play in all of this? Well, for sure the future will bring much more electronic interaction - the ability to transact without paper requires lots and lots of standards for those transactions. The promise of standards will also bring lower costs to insurers, especially if those standards are implemented once and for all in standard solutions such as the TIA solution. In my opinion the road is however long and winding, since agreeing on standards across Europe – not to mention the entire globe – is a complicated matter. I would welcome few simple initiatives (standards) to kick it off, for instance – why don’t we have one common scheme for car manufactures to publish car make/model information…

At TIA we have a dedicated team worrying about local and global standards, implementing these whenever required. An example is the upcoming European standard for payment transactions (SEPA) which we are currently looking into (in it’s various local flavors).

All in all a good day where some interesting discussions took place, however without any clear conclusion or direction. The future of the insurance industry has yet to materialize