New Expectations, Accelerating Rivalry

The Ice Age! The Ice Age movie franchise that centered on a group of mammals surviving the Paleolithic ice age produced five films: "Ice Age," "Ice Age: The Meltdown," "Ice Age: Dawn of the Dinosaurs," "Ice Age: Continental Drift" and "Ice Age: Collision Course." These movies reflect what we are seeing today in insurance and what we described in the blog, An Ocean Apart: Pre-Digital and Post-Digital Insurance Models. In that blog, we described the breakup of Pangaea (meltdown), a supercontinent formation that reset and reorganized the world’s continents, oceans and seaways (dawn and continental drift) and the subsequent elimination and survival of species (collision course). The breakup disrupted the world while creating one that would ultimately shape the future. The Digital Age! We are experiencing disruption due to people, technology and market boundaries (meltdown), a new insurance paradigm of innovative products and business models (dawn and continental drift) and the potential irrelevance and survival (collision course) of insurers as a result. Regardless of whether incumbent insurers choose, or are able, to play in a new digital age, Digital Insurance 2.0 is here in full force! At the heart of the digital age is a shift from Insurance 1.0 in the past to Digital Insurance 2.0 for the future. Insurance 1.0 business models of the past 50-plus years have been based on the business assumptions, products, processes and channels for the Silent and Baby Boomer generations. Gen X was the first generation to begin the shift with the introduction of personal computers and the Internet as early indicators of the future digital age. Today, millennial and Gen Z influence is intensifying, shifting the fundamental business models of all businesses, including insurance, by demanding the use of digital technologies and new products and services that align to their demographics, needs and expectations … creating Digital Insurance 2.0. The Customer Is at the Center of the Digital Age Shift In our 2016 report, The Rise of the New Insurance Customer: Shifting Views and Expectations: Is Your Business Ready for Them?, Majesco published insights based on primary research we designed to capture the views and expecta­tions of consumers across generational groups. Our goal was to compare perceptions of insurance with other businesses and industries to understand how other businesses’ digital shifts may be influencing insurance expectations. The research took a deep dive into consumer perceptions of insurance across the spectrum of researching, buying and servicing. The results indicated that insurance is ranked consistently last or nearly last in “ease of doing business” compared with other businesses. See also: How to Move to the Post-Digital Age?   This year’s consumer research, The New Insurance Customer – Digging Deeper: New Expectations, Innovations and Competition, built on the 2016 insights by assessing year-on-year behavior changes and by diving deeper into the disruptive implications of expectations, innovations and competition for new insurance products and business models. These have emerged into the market via insurtech startups and traditional insurers. The research decomposed these products and models into their component parts and measured reactions to them across the generations, providing insight into the impact and potential of the innovations and competition on the industry. These insights point toward an insurance industry that will rapidly intensify and accelerate changes and disruptions that are already underway. Further insights from the new research reinforce the view that change is being forced on insurers, whether they like it or not. The traditional insurance products, services and processes of Insurance 1.0 do not conform to what the next generation of insurance buyers, millennials and Gen Z, and even the older generations expect from their interactions with insurers. While there has been a lot of focus and discussion on the millennial generation, even with some startups specifically targeting them, Gen Z is even more digitally oriented. New Expectations, Innovations and Competition Within the industry, there is much discussion and debate about whether these new products and business models are “real” and will succeed. Based on the survey, there is strong indication that many will succeed, which will, in turn, intensify the momentum of the shift toward Digital Insurance 2.0. Majesco’s new consumer research clearly identifies this growing gap. Some of the highlights include:

• There was year-on-year acceleration of behaviors and experience with technology and trends that is intensifying the generational gap between Insurance 1.0 and Digital Insurance 2.0, highlighting the split in experience levels between Gen Z + Millennials and Gen X + Pre-Retirement Boomers.
• During the same timeframe, we measured declines of 10 to 15 percentage points across all generations on not trying any of these new digital behaviors or expectations. This means that all generations are dipping into digital behaviors with increasing frequency.
• The behavior and expectation increases have driven significant interest in innovative products and channels for insurance, with millennials leading the way.
• There was strong interest in most of the 30 new Insurance 2.0-related attributes covered by the survey, particularly for the younger generations of Gen Z and millennials … the next generation of buyers.
• Gen Z “breaks out” in a number of areas, surpassing millennials and setting the stage for further acceleration in adoption.
• Embracement of new Digital Insurance 2.0 business models already operational in the market is strong among Gen Z and millennials, positioning these early market entrants to capture both market and mindshare.
• When we asked about new models such as P2P, on-demand, embedded insurance and others, a pattern emerged, with the Gen Z and millennials aligning more with the new business models and products, highlighting their propensity to switch insurers to match models that fit their expectations and lifestyles.
• We discovered variations in behaviors and expectations where sub-segments of each generation align more closely with either Insurance 1.0 or Digital Insurance 2.0, highlighting the need for options and personalization that can be achieved through behavioral targeting and niche products.

What Should Insurers Do? Insurers must aggressively begin to plan and act on these shifts, rather than being educated observers. Each day, we see products introduced, channels established, new services offered, business models launched and much more. These innovations and competition, based on this new research, will rapidly capture the market share of the millennial and Gen Z generations, while also bringing along some of the older generations. Unfortunately, too many insurers are taking a page from their old business transformation playbooks and expecting it to work in today’s digital age. Instead, insurers need to look outside their companies to a new cadre of digital leaders and imagine the art of the possible. They must rapidly position themselves in the digital era of Digital Insurance 2.0 to:

• Accelerate digital transformation to become digital era market leaders
• Accelerate innovation with new business models and products
• Accelerate ecosystem opportunities and value
• Avert disruption or extinction by new competition within and outside the industry

Time is of the essence. The days of being a fast follower will no longer work because of the rapid and disruptive shift. Traditional insurers whose businesses are built on the Insurance 1.0 model will struggle to remain relevant as the older generations decline, while businesses built on the Digital Insurance 2.0 model for the new generations increase. The ever-widening gap between competitors that are innovating and shifting to Digital Insurance 2.0 and those that are not will become insurmountable, putting traditional insurers’ futures at risk. See also: 3 Ways to Leverage Digital Innovation   Digital Age insurers will be competitively prepared to survive the drifts, collisions and rebirth of insurance markets, and they will reach a new level of optimism in the coming years. They will be the ones writing insurance history, playing starring roles in insurance market sequels and riding the waves of risk to new insurance adventures.