The Future of General Insurance Industry

Aug 12

The need to be protected can be traced back to being as old as the history of human existence. It started with the discovery of fire, finding shelter for ourselves then further graduated towards setting up communities, villages and civilizations. The fundamental thought behind these was to stay together and protect each other. And to ensure that in our time of need we have someone to help us and be with us. The basic idea is to provide protection if something goes wrong. This is essentially what the principle of insurance is all about. But as societies started expanding it was getting difficult for smaller communities to take the responsibility of bigger risks and that’s how the concept of insurance was conceived.

Need for Security

When we talk about the future of insurance, we have to clearly understand that the need for security will always exist and human beings will continue to live for as long as this planet continues to be liveable. Thus inevitably insurance will definitely be around for as long as human beings will survive. The world around us is evolving, be it business, customer needs, distribution network etc. But one thing which remains constant is human emotions, bonding and our need to stay protected. If we clearly understand these fundamentals, it’ll be easier for us to see how the future of insurance will look like.

Insurance is a service industry and it has to place the customer at the center of all its functions. In its initial phase, the insurance industry only provided protection against particular incidents such as fire or accidents. If I recall, the first well-developed kind of insurance was offered for marine voyages and then slowly evolved to others such as fire insurance after the great fire of London. Then we gradually shifted to motor insurance with the booming of the automobile industry. Now the industry has undergone a complete change. Today insurance is not just about satisfying the customer needs, it is also about enhancing the customer experience and providing solutions to their problems.

Evolving Business Models

In the past couple of years, traditional business models have undergone a transformation. Companies like Ola, Uber, Airbnb are not just offering products but they are providing solutions and convenience to the customers. They have collaborated with different enterprises to provide solutions to the customers at their doorstep. This should give us an idea that,

“In the future customers would be looking for a solution and convenience along with the emotional assurance of being protected if something goes wrong.”

 Future of Insurance

Much is being talked about driverless cars being the next disruptive innovation in the automobile industry. In an environment where driverless cars become a regular occurrence, who would be held responsible for an accident? Not the driver of course but the manufacturer can be held responsible. From motor insurance which covers the damage to the vehicle, the cover will shift to a liability insurance for the manufacturer. We’ve heard about the recent case wherein the driver of a Tesla car was killed in a road accident after its autopilot mode failed to recognize the approaching truck. Reportedly the driver was watching a Harry Potter movie and wasn’t manually controlling the car when the crash happened. In such a case it is very likely that the car manufacturer would be held liable for the crash. Today automobile insurance constitutes half of the general insurance business globally. It is likely that this may suddenly reduce to a very small percentage. But this trend shouldn’t come to us as a shock. Because if we look at the history, a couple of hundred years back marine insurance contributed 80-90% to the total insurance business. This percentage has now drastically reduced to 2-3%.

The second thing which I see emerging very strongly is the mobile phone. All our banking transactions, payment details and now even keys are being handled by our mobile phones. This means that the mobile phone is becoming a single device in which our comments, news consumption and spending patterns are getting stored and thus there is a personal liability associated with it. When I was young I would often see people alarming each other about pickpockets but now I don’t hear about these incidences anymore. For a simple reason that, now a days in our wallet there’s nothing more than a bunch of plastic cards. So in the future, pickpocketing would happen digitally from the mobile phones. There could also arise a personal liability of comments posted on your behalf. This would definitely require shifting focus to securing your mobile devices and need for a coverage to protect people from the probable distressing situations.

Paradigm Shift

From a pure automobile insurance market, the shift in future is going to move to liability insurance and protection of a very different nature. Insurance companies need to start providing customer obsessed solutions. Some of the recent examples I see around this concept include 24x7 roadside assistance in case of motor insurance and services such as plumbing and other repair facilities in home insurance. Earlier a health insurance which would trigger when a person fell ill was good. But today the same health insurance is not good enough for the future ready customer. The insurance companies have to provide solutions in ways where it can help the customer manage their health better. These facilities include tracking their health with the help of wearable devices, providing them access to the best doctors, helping them follow a healthy regime and also offer them other wellness options.

Insurance companies need to step up from being someone who just comes into contact when a claim happens to someone who is there as a friend and stays in constant touch throughout the customer journey. I’m sure insurance companies will be able to evolve their products as per the customer needs.

“But changing the culture from a pure product and transaction based relationship to a culture of an emotional connect and customer obsessed solutions is what is going to help insurance companies sustain in the future.”

I’m excited to witness this transformation. I’ve been very lucky to have worked with a government insurance company in a nationalized environment at the start of my career and was later part of a startup when the industry opened up. Now the same startup is one of the leading names in the industry. With the world changing so fast in my lifetime I’m personally eager to see how the industry would change and become future ready. It will be good to witness this journey and I hope we will enjoy it in the future.