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October 14 2014 | Denise Garth


"We're at maybe 1% of what is possible. Despite the faster change, we're still moving slow relative to the opportunities we have."

This compelling statement from Larry Page, CEO and Co-Founder of Google epitomizes the power, potential, and impact of emerging technologies. Yet for most insurers, it is difficult to really comprehend how fast emerging technologies are being introduced, experimented with, and adopted. And the pace is gathering speed, having a profound and multidimensional impact on our lives, our businesses, and our industry. Moore's Law tells us that computing power doubles every 18 - 24 months, but even that seems to be irrelevant compared to the power of emerging technologies, because they are coming faster, and they are more formidable than ever before. 

This rapidly accelerating pace comes at a time when the convergence of advancing technologies, increasing customer expectations and demands, and access to capital for new technology start-ups are magnifying the extremes … from disruption and destruction to innovation and transformation. And the impact on the insurance industry is more profound, pivotal, and game-changing than ever before. Never before has such a breadth and depth of technology advancement had as much influence as what we are experiencing now.

Emerging Technologies Pace of Adoption, Disruption, and Transformation

Current technologies, along with the growing proliferation of emerging technologies, are now considered some of the greatest change agents since the introduction of the Internet. They promise innovative, game-changing breakthroughs that will challenge long-held business assumptions and shift the boundaries between business and industry – creating completely new businesses and industries. SMA is actively tracking nine emerging technologies: 3D Printing, the Internet of Things (IoT), Drones/Aerial Imagery, Driverless Vehicles, Wearable Devices, Gamification, Artificial Intelligence, Semantic Technologies, and Biotechnology, both from within and "outside-the-industry" to gain a contrasting view. The new research report, Emerging Technologies: Reshaping the Next-Gen Insurer, provides unique insight into these emerging technologies' adoption, investment plans, and opportunities for business areas, as well as the greatest risk and potential for disrupting or transforming insurance.   

Not surprisingly, adoption is being led by the Internet of Things (IoT). The IoT is followed by Artificial Intelligence (AI), Drones/Aerial Imagery, and then Gamification. But more impressive is the insurance industry's rapid uptake and the potential of these emerging technologies to transform and innovate insurance. Five of the nine technologies are projected to arrive at or go well beyond the tipping point within three years. Even more impressive is that all nine are projected to surpass the tipping point five years.

Adding to the momentum, individuals and companies that are a part of SMA's Innovation Ecosystem and represent outside-the-industry perspectives see an even faster rate of adoption and greater potential in the transformation and innovation of insurance. This underscores that the insurance industry is on the crest of a massive wave of wide-spread change that will unquestionably influence, disrupt, and transform insurance in major ways.

Over the next five years, these emerging technologies, just like Internet, smartphones, and social media before them, are expected to drive new business models and foster the formation of new companies that have been created from unexpected combinations of companies and industries—all with the purpose of capturing and owning the customer relationship and revenue. The astounding influence of these technologies – over a relatively short period of time – will begin to delineate a new generation of market leaders within and outside the insurance industry. Who will be the next Facebook, Uber, or eBay?

Implications and Opportunities for Insurers

So how should insurers respond to this rapid pace of adoption? Insurers must quickly begin to develop strategies, experiment, and invest in these technologies today. If not, many insurers will be placed at significant risk, since there is typically a minimum two year lag time between leaders and mainstreamers and a minimum four to five year lag time between leaders and laggards. And given the pace of adoption of these technologies by insurance customers, the lag time carries more potential for damage than it did in the past. Just consider that the Apple iPhone was introduced just seven years ago, in June 2007. The result has been massive destruction and transformation that has created new leaders while forcing others into increasing irrelevance.

While it may be difficult to grasp the sheer magnitude of the emerging technologies adoption and transformation potential, remember we are only seeing 1% of the potential. As such, insurers must aggressively find a way to engage and embrace these technologies and uncover the potential, first to stay in the game, and then to win it. And to do so, they must have modern core systems as a foundation to integrate the use of these technologies. 

So what are the potential implications for insurers? Consider these questions: How will product liability need to be redefined for driverless vehicles? If individuals or businesses no longer need auto insurance, what is the impact to other products? Multi-policy discounts? Will it encourage shopping for alternative options? Will it drive commoditization into other products? How will insurers assess the value and risk of a 3D-printed structure, body organs, or vehicle parts? How will biotechnology-based agriculture change risk factors? How will drones help underwriting and claims? Can drones also provide resources needed during catastrophes, creating new services and value? Could gamification be a new channel to help drive increased market penetration through engagement and education about life insurance, health, medical, liability, home, umbrella, and more? 

These are but a few of the implications for insurance. They are not single focused, but rather inter-related and complex. They stress the significant disruption and change that is coming, and coming fast, as represented by the five out of nine emerging technologies that will reach the tipping point within three years … and some much sooner. Insurers that have not even begun to assess, strategize, or pilot these technologies are already lagging behind and will struggle to keep up with this accelerated pace of adoption, not just from today's competitors, but also from tomorrow's competitors, as well as their customers. That poses a question … Will you remain relevant within the next five years, or become the next Kodak, Blockbuster Video, Borders, or CNN of insurance – the iconic brand that dies a fast or slow death? 

The coming years hold an unparalleled promise of opportunities for transformation and innovation, and matchless potential for becoming market leaders that leverage emerging technologies to increase customer value, engagement, and loyalty to insurers. As Steve Jobs stated, "Everyone here has the sense that right now is one of those moments when we are influencing the future." The question to you is: Will you be an influencer of the future or a remnant of the past?

Contact me at dgarth@strategymeetsaction.com if you'd like to learn how SMA can help you on the innovation journey and discover new opportunities for the insurance industry. Click here to learn more about SMA's research. 




For more information, please contact Deb Smallwood at dsmallwood@stratetgymeetsaction.com