IBM Institute for Business Value Global C-suite Study
The platform-fueled future: New ways to differentiate in a changing insurance industry
Armonk, NY (Sept. 14, 2018) – Deep-rooted paradigms in the insurance industry are shifting. With bespoke legacy systems impeding innovation, leading carriers are looking to industry platforms – often powered by entrepreneurial InsurTechs and other technology providers – to reduce cost, enhance flexibility and most importantly, improve customer experience and engagement.
Platforms are a game-changer, with adopters of platform business and operating models gaining a decisive edge over competitors. Based on a survey of 1,000 insurance executives globally, we explore how platforms can free up insurers to differentiate on what they do best: manage, mitigate and price risk.
What is a digital platform?
A platform connects two or more participating entities and allows them to interact with each other, thus enabling interactions between producers and consumers. Platforms consist of three elements:
- A marketplace or ecosystem;
- One or more applications;
Today, business platforms represent a huge opportunity. According to the IBM Institute for Business Value (IBV) Global C-suite Study, companies operating business platform models can achieve market valuations as high as eight times their revenues. The total investment in these models is estimated to be up to USD 1.2 trillion over the next few years.
The insurance industry has been hesitant in platform adoption, just as it has with adoption of prior new technologies. While other leading industries have been significantly increasing the proportion of their investment capital allocated to platform business models (for example, petroleum with 50 percent, travel 27 percent and banking 18 percent), insurers increased platform investment by a mere 7 percent.
But while only 36 percent of insurers derive revenue from insurance platforms today, they do expect this to change in the near future. More than 80 percent of insurers overall – and 99 percent of outperforming insurers in particular – expect at least 3 percent of their revenues to come from insurance platforms within the next three years. And more than half of outperforming insurers expect the figure to be more than 10 percent.
The good news is that while insurance platform adoption remains relatively low, leading insurance companies are already experimenting with platform participation across one or more roles. They can run the platform as owner, be an end-consumer of the platform’s services, or add services themselves as platform complementers or suppliers.
In This Report
- Four roles insurers can play in a platform;
- The top five reasons non-adopters are not participating in insurance platform;
- Platform benefits that can improve both sides of the balance sheet.
Access the Report
Visit the report overview page for more information or to download the report.
For a summary, read Christian Bieck’s blog post, “The platform-fueled insurance future.”
About the IBM Institute for Business Value
The IBM Institute for Business Value, part of IBM Services, develops fact-based strategic insights for senior business executives around critical public and private sector issues.
IBM (NYSE: IBM) is one of the largest technology, services and consulting organizations. We help clients of all sizes and in all industries transform their operations through the use of technology, infusing intelligence into the systems that run our businesses, our society and the world. Visit www.ibm.ca for more information.
SOURCE: IBMTags: IBM, insurance platform, InsurTech, Next Generation Platform, platform, study