Mergers & Acquisitions Insurance: How It Plays A Role In The Service & Product Adoption
Despite seeming reluctant to make sweeping changes, the insurance industry continues to be at the forefront of adopting digital solutions. The groundswell of new consumer needs and expectations, especially over the past year, has pushed change forward, with offerings trending toward more customization, product flexibility, service options, and prevention services.
In this segment of the series, we examine the role M&A will play in the industry’s adoption of insurtech — and more generally, the need for established carriers to adapt to the increasingly innovative and service-based product and service offerings new entrants bring to bear.
It’s been widely discussed that as disrupters give customers a more personalized experience, with more options for easier use of their products and services, legacy firms are feeling pressure to update their product and service portfolios — or acquire new entrants — to retain business. Customization is something consumers have come to expect across many industries, and the data collected by insurers allows them this same capability — but few carriers are taking full advantage of it.
Disruption in product offerings is shifting traditional mindsets, fueled largely by small to mid-sized firms offering more customization and simplified solutions based on a customer’s past behavior or other data collected. In the alt health and auto insurance industries, user activity data is being used to offer custom insurance plans and quotes in far shorter amounts of time. These solutions are more likely to reach the right people at the right time and therefore are both better for consumers and an easier sell for insurers.
In today’s market, some of the premium volumes from offerings were not available five years ago. Looking to the future, most insurers can generate business from service-based offerings rather than products — versus the ones that we have today. These services might include roadside assistance, educational and informational services around cyber security or investments, or other service offerings that are easily bundled with insurance products while providing the consumer with added benefits.
There is an emerging shift away from products that protect against loss toward proactive, preventative products and services. Many of these new offerings will use sensors and technology to collect data in a safe and maintained way to increase both measurability of risk and the likelihood of prevention. As instant claims payments based on measurable parameters continue to rise, insurance firms are developing simpler digital products for large commercial use. Data analytics allows insurers to get a clear view of the outcomes of these efforts and use them to adjust pricing and offer customers additional personalized solutions.
However, the industry faces a related and potentially bigger problem. With new product offerings comes the need for different capabilities, skills, and behaviors to deliver against these products, many of which feature new technologies that allow for more data collection. This creates a massive need for new capabilities for workers to work with and interpret this data. With more demand to create in-time solutions to specific unfolding customer pain points, the workplace needs to become more skilled and flexible, as testing and iterating will need to happen quickly.
At a time when there’s a massive shortage of tech workers across all industries, insurers will need to intensify their efforts to find and attract the necessary labor force. Acquiring a book of business, capability, or patent could be a strategic way to gain an influx of people and process impact — though statistically, more than 80% of an acquired company’s talent is lost, along with significant displacement of people within the acquiring firm. In response to this, organizational structures will have to shift to account for new offerings, both organic and inorganic. Centers of excellence as well as outsourcing some non-key functions will accelerate the growth of new functions. Evolving skill acquisition will certainly require M&A expertise to procure and integrate capabilities that will close the gaps in the product and service portfolio.
M&A is a smart way for insurers to enhance their offerings while introducing more technology and talent into their firm. Although the industry suffered a downturn in overall investment when the pandemic hit everyone globally, Insurtech activity was at an all-time high.
Firms that frame the shift in customer expectations as an opportunity, building their organizations and especially their talent base around what customers want, will emerge as tomorrow’s success stories.
Inmediate is an insurtech startup from Singapore that is using the latest technology such as Artificial intelligence, Distributed Ledger, and NLP, making insurance processing and underwriting fast, cheap, and flexible. That gives for better processes, lower costs, improved time to market, and new revenue opportunities.