The same forces that have caused massive disruption to personal lines insurance are emerging in commercial lines. They will bring significant changes including the increasing role of aggregators, shifts in the broker model, and the way in which carriers compete.
But there are big potential prizes for those who show the strategic courage to shape and become part of the new order.
Disruption is a well-used term that has arguably lost its ability to shock. But it is as important as ever to understand why disruption occurs and to evaluate the implications for commercial insurance. We believe that three market factors create the necessary conditions for disruption, namely:
1. Poor customer experience and/or a complex or cumbersome buying process
2. Converging sectors with falling barriers to entry enabled by technology
3. High revenue potential, attracting potential disruptors looking to disintermediate (or even reinvent) the value chain with a simple proposition or cost advantages
Commercial insurance is characterized by complex buying processes in a large and valuable market, making the sector ripe for disruption, with technology acting as both an enabler and accelerator of disruption. The disruption is likely to be fueled by seven key trends:
1. The risk of aggregators
2. The future of excess capacity
3. Demand for new products and solutions as businesses develop different risk profiles
4. Customers demanding broader solutions, rather than just insurance products
5. Collaborative development of solutions to meet emerging customer needs
6. Cognitive computing advancements creating value through sophisticated analytics
7. The changes to business models and requirements for more agile operating models
In this series of articles we examine the trends that drive disruption, the likely market impact and resulting opportunities for market participants.