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Insurance on the platform


New cost and revenue opportunities await insurers that break with traditional strategies and embrace a platform business model.

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The insurance industry has never been famous for rapidly embracing change. Overall, it is still stuck in a traditional mode of thinking about products, processes, and systems. Yet to the industry’s credit, recently the narrative has been shifting. Insurance executives are actively discussing strategic innovation, and many are committing their strategies and initiatives to customer centricity, digitization, and innovation.

The industry’s recent strategic shift is an overdue reaction to the building pressures insurers face, including changing customer buying behaviors, tough market conditions, and new disruptive competition. On one side, customers – especially the younger generations – expect insurers to offer highly personalized products that complement their digitally oriented lifestyle. Many customers rent instead of own and expect protection – not insurance – to be part of a larger package. On the other side, insurance incumbents face a crop of new competitors that cater to customers’ changing needs. Digital giants use their vast treasure troves of data and customer access to offer personalized services, while organizations from adjacent industries are including insurance in their packaged approaches.

To better understand how insurers are reacting to the changing environment, the IBM Institute for Business Value interviewed 1,000 insurance executives in 35 countries globally. We were specifically interested in how insurers view platform business models and their potential for the industry.

Time for a change

Our survey shows that insurers have grown more aware of the disruption coming their way – and are starting to prepare. More than three quarters of respondents tell us platforms are disrupting the traditional insurance value chain, and the same percentage say they have adapted their strategy in response to this disruption.

A large majority of surveyed executives agree that the insurance industry needs to diversify beyond traditional coverage. Insurers seem to understand that next-generation consumers want to be to protected before something bad happens – they want preventative coverage that helps them avoid negative incidents or conditions in the first place. And when an accident does happen, these consumers expect their insurers to help as quickly and broadly as possible rather than simply pay out a claim.

Executives’ recognition of the need for diversification and strategic innovation is encouraging. Yet insurers are still heavily focusing their innovation efforts on classic coverage products. Almost all respondents – 96 percent – say they plan to increase their investment in product innovation over the next three years, which for most insurers means tweaks to existing products. And 85 percent of insurance executives see traditional products, not risk prevention or quick help, as their organization’s main source of value over the next three to five years.

In addition to a continued focus on traditional products, insurers still remain tied to their traditional ways of working. They view legacy IT systems as a central part of their business model. Seventy-six percent of our survey respondents cite back-end systems as part of their organization’s core competency, while 75 percent of respondents view their back-end systems as a differentiating factor. However, our data and analysis do not support the notion that existing systems lead to the flexibility and differentiation insurers seem to think they do.

Breaking with tradition

So, what is the path forward? How can insurers branch into nontraditional products – and thus revenues – and drive broader innovation? This is where platforms come into play.

Platform business models break with the traditional value chain approach of the past by creating ecosystems of contributors and users within the platform. This in turn allows new products, new ways of working, and new innovation approaches.

Participation in platform business models and their corresponding ecosystems enables insurers to engage in new cost and revenue plays, transcending their regular business operations. Read the report to learn about our recommended approaches for insurers looking to improve their future readiness through platform business models.


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Additional content

Meet the authors

Christian Bieck, Global Insurance Leader, IBM Institute for Business Value

Fuad Butt

Connect with author:


, Associate Partner, Industry Platforms - Insurance


Patrick Sheridan, Executive, IBM Global Insurance Center of Competency


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