This is the time for action

By: Ronny Reppe, 18. July 2021

The insurance sector needs to wake up fast to the changing needs and desires of customers. Effective use of technology is the answer. Ronny Reppe, CEO Noria Insurance Software, explains why and how.

As we have entered the 2020s, most agree that the insurance industry will face rapid change in the coming years. During the next five to seven years, we will witness completely new demands emerging from the market, triggered by technological changes and new business trends driven forward by digital disruptors and early adopters. The changing environment of the insurance industry will ultimately require incumbents to provide their consumers with more value for money. To get there, insurers should focus their efforts on two significant areas: First, to increase their operational efficiency, and, second, to simplify and improve their customer experience. The insurance players that make the most optimal technological choices and best adapt to the new market conditions will be the industry winners.


Powered by increasing customer expectations and new technologies such as automation, machine learning, analytics and IoT, the insurance industry will undergo a transformative process that will evolve the industry from manual to digital operations. The industry is on the brink of disruption, being one of the most susceptible industries to future disruption, according to a recent survey by Accenture.

This found that carriers that are slow to respond to the changing market conditions could suffer significant market share erosion. The already ongoing disruption of other industries suggests that this claim is valid. Take the telecommunications industry as an example. During the last few years, conventional telecom players have faced declining revenues as so-called over-the-top service providers (OTTs) have entered the stage to deliver services that reduce the demand for traditional voice and messaging business.

These digital disruptors, such as Apple’s FaceTime, Google Hangouts, Skype and WhatsApp, use existing telecom infrastructure to deliver the same services that used to be under the domain of incumbent telecom companies. Built on innovative business models, these OTTs threaten to provide services at a lower price than traditional telecom providers.

Telecom providers, then, may end up playing the role as an infrastructure provider while other companies take on more customer-facing roles. The telecom industry is not alone. Other sectors, such as media and banking, face similar challenges, and it is not unlikely that analogous situations will emerge in the insurance industry. Signals are already emerging, indicating that digital MGAs will leverage existing “infrastructure”, in the sense of insurance systems, administrative capabilities and risk financing, to build novel digital services. Incumbents, then, can be relegated to infrastructure providers while digital MGAs create a new layer between them and their existing customers.


Three significant business trends are today emerging in the insurance industry – insurance ecosystems, on-demand insurance and dynamic pricing of risks – indicating radical change over the next few years. Embracing these trends is critical to stay competitive as an insurer during the 2020s and beyond. Ecosystems refer to a general business trend that is emerging across a wide variety of industries, where organisations group together in networks to create novel and value-adding solutions for customers and consumers. These networks often involve players from different sectors, whose products and services in some way or another complement each other.

Within the insurance sphere, forward-looking insurers are already creating or joining ecosystems with players in other industries to provide better services for existing and potential customers. Take the insurance company Progressive as an example. It has partnered up with the fleet management company Zubie and the mobile telematics company TrueMotion to gain access to valuable sensor data that can be used to develop new hybrid insurance models. The idea of partnerships runs throughout the insurance ecosystem trend.

Insurers do not need to move sell products or services that fall outside the insurance industry boundaries. They can instead partner with players that sell other products to create an ecosystem of relevant products sold as a totality. Another Accenture survey shows that four out of five insurance executives acknowledge that ecosystems are an important part of their strategy. However, currently, only five per cent of insurers can be defined as ecosystem masters.


Another significant trend is the on-demand economy, where companies provide consumers with immediate access to goods and services through digital marketplaces and innovative use of technology. Within the industry, a handful of challenger insurance companies allows their customers to purchase insurance when and where they need it through mobile apps. One of the most well-known examples is the San Francisco-based InsurTech Trov.

As one of the first companies to offer on-demand insurance solutions, they allow their users to buy insurance for personal belongings, home and travel insurance and car insurance via a mobile app. Their customers can purchase the insurance on an as-needed basis, which means that they only pay for insurance when the insured object is in use. In 2017, on-demand insurance represented below one per cent of the global insurance market. Since then, the trend has gained significant traction and is expected to grow by nearly 30% by 2026.

“in 2017, on-demand insurance represented below one per cent of the global insurance market. Since then, the trend has gained significant traction and is expected to grow by nearly 30% by 2026.”



The traditional pricing strategy in the insurance industry is changing. Insurers are departing from a one-size-fits-all approach to embracing a pricing strategy that differentiates the insurance price according to the specific situation and to the particular risks involved.

This trend is called dynamic pricing, which involves using algorithms that change the price of insurance based on various potential factors and data from a range of sources. Dynamic pricing enables insurers to estimate risk more accurately and provides customers with different prices based on their risk level. In other words, dynamic pricing generates price quotes that are tailored to a specific sale.

The international InsurTech Loadsure is a shining example of how the three trends we see emerging in the insurance industry can be leveraged to take the lead on digital insurance operations. The company offers insurance solutions aimed at the freight spot market, where millions of loads are transported without sufficient coverage every day – a huge liability for shippers, brokers and carriers. Wanting to improve the situation, Loadsure partnered up with leading digital transportation management platforms to offer a full-service freight insurance solution at the click of a button (insurance ecosystem). This solution enables customers to purchase all-risk coverage directly from the digital marketplaces used within the freight and logistics industry (on-demand insurance).

Furthermore, the solution collects data on everything from damage history to weather predictions during the freight period to automatically change the insurance price according to the risks involved (dynamic pricing). The consultancy firm McKinsey has identified four concrete stages of disruption, as seen from the perspective of incumbents.

During the early stages, incumbents barely feel any impact on their core businesses except in the periphery. But signals arise that indicates demand begins to “purify” – in other words, that customers address their previously unmet needs and desires. During the second stage, a clear trend has emerged. New technological and economic drivers have been validated, and incumbents must commit to new initiatives to stay relevant. Then, in stage three, a new model has proved superior to the old, and the industry is increasingly moving towards it before the industry fundamentally changes in the last stage.

I believe that the insurance industry is currently moving closer and closer to the second stage of digital disruption, as the three business trends are gaining more and more traction. Those who would like to stay at the forefront and quickly adapt to the changing industry dynamics should investigate and identify how these trends can become a vital part of their strategy during the 2020s.