The role of the insurer in a digital world

The digital economy is constantly evolving. To serve customers well in the highly digitised future, insurers have to understand the changing landscape and their role within it.

Throughout history, insurance has evolved in tandem with society, providing stability for economic development and entrepreneurial activity. For example, the merchants of Babylon used simple maritime contracts as early as 4000 to 3000 BCE to protect their growing trade activities. Without the invention of such support systems, it would have been virtually impossible for society to advance as it has.

As risks have evolved, insurance solutions that mitigate those risks have followed suit. However, with the rise of digitisation, many fundamentals have changed as well. Insurance firms now face a new ecosystem of interconnected services, decentralised platforms, and shifting user behaviour.

Tectonic shifts driven by digitisation

In light of these changes, innovative insurance solutions that support and enable disruptive business models are in high demand. The needs of digital business models and new technologies are unique, and the insurance solutions need to reflect their special risks.  The role of an insurer cooperating with a business trying to solve a problem therefore has to change as well.

According to Forbes Magazine, to “stay relevant and competitive, insurance companies should shift focus to solutions rather than products”.

This statement mirrors the view of Meryem Seyyar (pictured), Head of Digital Solutions at global insurance firm HDI.

“Adequate risk solutions are not accessible to many entrepreneurs because their business models are completely new, and the risks are new as well.”

Therefore, the Digital Solutions unit has developed an approach that provides tailored insurance solutions for even the most complex business cases. One example is HDI’s partnership with a company to create an insurance plan for its autonomous electric shuttle services, which began road tests in 2021. The solutions had to be tailored to the clients’ needs by working together in great depth.

The same approach applied to HDI’s partnership with a cryptocurrency wallet security firm. Structuring a solution based on a standard insurance product was not an option because such solutions currently do not exist. Offering adequate insurance was only possible by viewing the process as a true partnership and by regarding HDI’s own role as that of a provider of flexible solutions.

More disruption to come

As these examples show, it is possible to fundamentally change from being solely a risk carrier to being a partner/enabler. This needs to be accompanied by a shift in culture from legacy business to innovator.

That shift becomes even more relevant as the most disruptive changes still lie ahead. The rate of innovation is likely to keep accelerating both on the customer side and inside the insurance industry. According to a report by consultancy firm McKinsey, “the rapid evolution of the industry will be fuelled by the extensive adoption and integration of automation, deep learning, and external data ecosystems”. Insurers have long been helping to mitigate the risks associated with new business models. Now, new technologies like IoT (Internet of Things) and machine learning allow insurers to work directly with businesses to detect unknown risks and collaborate to avoid and mitigate them.

Insurers can no longer afford to be reactive

According to the World Economic Forum, “digitisation increasingly impacts all aspects of our lives and industries”. To adapt to this fast-changing environment, insurers will have to put a considerable focus on diversity, flexibility, and technology.

Insurers have to be diverse when it comes to the backgrounds and skillsets of their workforce. Subject matter expertise now has to include topics such as the blockchain, micromobility and autonomous driving. In addition to developing this expertise, insurance teams must learn how to smoothly integrate customer relationships, service management, and analytics.

Insurers will also have to become more flexible and nimbler. They can no longer afford to be reactive. They need to become true enablers who are close to the pulse of technological development. As business models emerge and established businesses adapt to new digitisation trends, insurers will have the opportunity to continue their fundamental contribution to society by enabling the realisation of their customers’ visions for the future.

Authored by HDI Global