The use of wearables and the internet of things (IoT) in insurance allows for the personalization of products, services and prices. As a result, Accenture predicts $120 billion in revenue opportunities in products and services enabling smart auto, smart home, and smart manufacturing on the commercial side. (Credit: Sergey Nivens/Fotolia)
The global insurance industry has historically been resilient, and this was further tested and proven during the pandemic. Every insurance line was affected to some degree, and a global recession resulted in a decrease in business asset values and volumes.
Business interruptions, event and travel cancellations, as well as mortality heavily impacted claims, hit the bottom line and turned business models upside down. Coupled with emerging risks, such as extreme weather and cybercrime, 2020 was a year like no other for insurers across the globe. COVID-19 also heralded a new era in customer engagement and accelerated the transition to digital for many insurers, with some markedly valiant innovation programs.
And so, as we slowly emerge from the pandemic and valuations gradually improve, insurers are reflecting upon the past (almost) 18 months of disruption that no actuarial model predicted. With the marketplace changed forever, what revenue opportunities lie ahead, and how can insurers get a march on their existing and future rivals?
Accenture's recent Insurance Revenue Landscape 2025 analysis found that insurance industry revenues are expected to grow by $1.4 trillion to $7.5 trillion over the next five years. About $280 billion of this will come from new risks, products and services. As customers renew their policies with data-driven offerings, $140 billion of current insurance revenues may switch from traditional to technology-enabled insurance products, including switching to behavior-based insurance for connected vehicles and smart homes.
Concurrently, another $140 billion of current revenues from traditional insurance distribution could shift to digital distribution experiences as customers purchase insurance on digital channels and third-party platforms. While our research indicates that the insurance industry will remain resilient and grow substantially, the pace of technology and societal change is coming faster than expected.
There will be no "rising tide" here, and it will require careful navigation to capture a share of these opportunities in both the product and distribution areas.
With innovation-led revenues poised to replace traditional revenues in many product lines, insurers have to either innovate or fall behind. Insurers will not remain relevant, retain customers and grow market share with their current offerings. Let's take a look at how.
Customer engagement reimagined
The recent acceleration to digital channels during the pandemic threatens the renewal of some traditional premiums and alters the future revenue landscape for insurers. Insurers that move from traditional to technology-led offerings that are better integrated with customer data are better positioned to lead; others risk losing revenues to digital-first competitors and new entrants.
An ever-evolving world filled with environmental risks, cyber threats and more people feeling physically and financially vulnerable is causing insurers to reimagine their role in the economy and position themselves as risk preventers, not only compensators. Insurers have a real opportunity here to create a model of continual engagement and risk monitoring to mitigate, manage and control risk.
This continual customer engagement model is already well developed in other industries but can be challenging for insurers, who often carry a heavy legacy technology burden, as it will require a vastly different kind of technology and operations environment.
Integrating tech, traditional products
The use of wearables and the internet of things (IoT) in insurance allows for the personalization of products, services and prices. As a result, Accenture predicts $120 billion in revenue opportunities in products and services enabling smart auto, smart home, and smart manufacturing on the commercial side.
These technologies also offer insurers the opportunity to leverage real-time customer data to improve the overall customer experience, increase engagement and monitor changes in risk.
In health, we're seeing that consumers are increasingly comfortable sharing data for products that help them maintain healthy habits, giving insurers an opportunity to provide a more holistic risk-management service that changes their role from financial safety net to an active partner in preventing and mitigating injury and loss. For example, Manulife's activity tracking program, ManulifeMOVE, uses data from fitness trackers to provide customers with premium discounts. This has proven to be a key customer engagement tool and popular with both younger customers and those over 45.
Welcome to the new revenue landscape
Overall, to succeed, future-ready insurers need to reimagine customer engagement, create a differentiated set of products and services and invest in future-ready business capabilities to support them. Meanwhile, they will need to make scenario-based plans that help build resilience into their strategies and manage and protect against ever-evolving types of risk.
All insurers are already operating in a new revenue landscape. With traditional revenues slowly being replaced by innovation-led revenues, reflecting the changing demands of our changing world, insurers need to move now to shift their business. These "future" revenues will become the present faster than most would expect.
Kenneth Saldanha is the global insurance lead for Accenture.
Opinions expressed here are the author's own.
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