My humble view on insurance transformation [part I: state of the union]

Insurance business still blooming or losing its ground?

Part I: State of the union

Safety and peace of mind are some of the essential needs of almost every human being. Insurance companies have delivered that for decades. Insurance coverage is essential for economic as well as social reason – through out every insurance segment.

Especially private retirement provisions are getting more and more important – not least because of low interest rates, increasing longevity, and state pensions that tend to decrease. Best agers treasure up their wealth on savings accounts, earning almost zero interest. Tax incentives and unique selling propositions add additional pros to the account of life insurance industry.

So, all in all, a perfect environment for insurance business these days, isn’t it? Is it for insurance companies the time to lean back?

No, it is not!

The status quo offers some «issues» that make life a little bit hard and that may sound the bell for an end of paradise. Just think about increasing competition, more critical customers, stricter regulations, potential competitors from outside the industry and potentially the Tech movement, respectively (afterwards simply called «Tech»).

Actually, insurance industry is in an upheaval and in a life crisis. The industry has to deal with several challenges on several levels.

On macro level, the advancing individualism of customers and the low interest rate environment in combination with higher regulations fuel the need for innovation and for processes, products and services that are more flexible.

Customers are accustomed to digital experience offered by companies like Amazon and Google, and they will expect the same level of customer experience from an insurer – and not in ten years but tomorrow.

On company level, topics such as capital efficiency, a powerful step-in of risk management, de-risking of products, complex processes and expensive administration represent a huge obstacle for innovation. Given systems, processes and organization of most of the existing insurance companies make digitization and individualization difficult to achieve.

Are insurance companies really aware of that?

Probably they are but they do not initiate the right measures and they do not come up with a decent strategy to deal with all these issues.

On micro level, the complexity of modern products and their extensive and incomprehensible documentation complicate sales process, a further circumstance that does not accelerate new business.

On top of all these issues and topics, the sword of Damocles named «disruption» seems paralyzes incumbents.

First, disruptive innovations are naturally present from times out of mind and they will stop at nothing – not even at insurance business.

Furthermore, insurance business is, as a highly regulated industry, a fenced off industry and thus, on the long run, highly vulnerable to disruptive innovations from outside. It is just a question of time, until someone will figure out a way to improve product offer and customer approach. Digitization, individualization and efficient administration will help here.

Insurance business will change because it has to change. Therefore, it is time for companies to reconsider their existing business model and the way in which business is done today. A holistic and decently prepared strategy – let’s call it a new business strategy – becomes the compass for the journey into the future.


Read here the introduction to my series of blog posts about the tech movement and the incumbents’ activities as well as a guidance on how an insurance company should act right now. My next blog is about the tech movement.