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Digital Transformation in US Insurance Industry

  • ID: 4102768
  • Report
  • March 2017
  • Region: United States
  • 97 Pages
  • Venn Research Inc
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Buyer Power Is Weakened in the Insurance Market As a Result of the Large Number of Individual Customers Acting in the Form of Market Consumers

This is one of the most comprehensive research reports published on the Digital transformation of US insurance industry. Within this research report, we have covered the key challenges faced by current US insurance industry and how digital technologies are being leveraged to overcome them and transform the industry. The report progresses by highlighting the key industry risks, and challenges, market trends and impact of technology on insurance Industry value chain.

This report has an in-depth focus on:

  • Insurance Industry Risks and Challenges
  • Key CIO Perspectives of Insurance Industry
  • US Insurance Industry trends and forecast
  • Key Investment Landscape
  • IT Spending Trends of US Insurance Industry, 2014-2020
  • Adoption of Digital Technologies (IoT, Cloud Computing, Automation, Analytics)
  • Ladder to Digital Transformation

Key Dynamics:
Customer loyalty is also low in in the insurance market, except in the cases where long term policies have been purchased. With the inclusion of price comparison websites globally, this permits customers to obtain a number of insurance quotes. In doing so, price sensitivity is affected in the insurance market. Market players are unlikely to backward integrate into ICT and software, despite the fact they themselves maintain their own IT departments and software. Insurers are however likely to offer reinsurance products.

On this note, ICT and software houses are unlikely to forward integrate into insurance, even though reinsurers often offer insurance products. Through strict legislation dictating the legally expected behavior and action of players, Government regulatory bodies present significant entry barriers for potential new entrants. As some insurance is a legal requirement e.g. Property, Health and Motor insurance, there are no alternatives to these insurance products. Alternatives do include other financial products such as savings and investments.

The US alone constitutes more than one third of the global market value for non-life insurance. Buyer power is weakened in the insurance market as a result of the large number of individual customers acting in the form of market consumers. The impact of losing one customer is minimal to players. Equally the volume of customers means that the customer diversity is significant, this in turn impacts on bargaining power and financial strength. An individual consumer or small to medium sized businesses have very little sway when negotiating with insurers.

In these instances they are generally forced to pay the price dictated by the market players. In contrast to this, larger corporations and organizations such as government agencies have a far greater degree of influence. This boosts buyer power somewhat, however as the individual customers and the small to medium scale businesses account for the majority of the market, this increased buyer power is offset due to the masses.

Large businesses and organizations hold a greater deal of bargaining power with insurance companies as opposed to individuals. As large businesses such as airlines and pharmaceutical companies pay increased premiums in comparison to small businesses, insurance companies are more likely to lure these high-margin corporate clients; generally through loyalty discounts. This in turn increases buyer power.

Government regulation is stringent in countries such as the US, with the Insurance Regulatory Information System (IRIS) responsible for overseeing companies in the insurance market. These factors may discourage newcomers. However, the market is not as regulated as other financial services. Another threat for many insurance market players are other financial services companies entering the market: some banks and investment banks have started to offer insurance products. In some countries however, regulations are in place to prevent banks and other financial firms from entering the market, creating an entry barrier for new entrants.

Who Should Read This Report
Executive leaders and business unit leaders, procurement managers, advisors, Investors who have responsibilities to set their organization on a Digital transformation journey.
What You’ll Know After Reading
Readers will get a deeper understanding of the current risks and challenges emerging within Insurance industry. The report touches upon the disruptive technologies like cloud, analytics, automation etc. and their impact on the industry growth, existing business models and customer experience. It highlights the growing IT investments on various IT infrastructure components. Readers will be exposed to some thumb of rules and steps to keep in mind while defining their digital business strategy and tackle the challenges during their digital journey.  Finally, we provide an outlook for how the insurance market could evolve.

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1. Factors Impacting US Health Insurance Industry

2. Digital State of Global Insurance Industry

3. IT Spending for the US Healthcare Insurance Industry
3.1. Insurance Industry Average IT Spending Benchmarks
3.2. Market Drivers for IT Spending
3.3. Opportunities
3.4. Insurers' Top 8 Digital Transformation Projects

4. Digital Transformation – A Priority for Healthcare Insurance Providers
4.1. Digital Transformation Impact on Healthcare Insurance Industry
4.2. Financial Impact of Digital Transformation

5. Disruptive Technologies Impacting Healthcare Insurance Industry
5.1. Key Pillars of Digital Culture
5.2. Key Disruptive Technology Trends

6. Digital Transformation Approach of US Health Insurance Industry
6.1. Key Rules for Digital Transformation
6.2. Key Steps for Digital Transformation

7. Customer Engagement is Key to Digital Transformation

8. Insurance CIOs Cloud Computing Strategy

9. Challenges of Digital Transformation

10. Emerging Business Models for US Health Insurance Industry

11. Appendix:
11.1. List of Digital Transformation Initiatives across Global Insurers

List of Figures:
Figure 1: Disruptive Trends in Health Insurance
Figure 2: Benefits of Digital Transition
Figure 3: Insurance Industry Digitalization Index
Figure 4: P&C Insurers Digital Progress
Figure 5: P&C Insurers Digital Performance
Figure 6: Life Insurance Digital Performance
Figure 7: Share of Digital Customers
Figure 8: Digital Channels in Insurance related Activities
Figure 9: Insurance Product Customization for Digital Channels
Figure 10: Acceleration in Product Development
Figure 11: Shift from Physical Sales to Digital Sales
Figure 12: Adoption of Omni-Channel Capability
Figure 13: Usage of Digital Tools for Sales
Figure 14: Integration of Multimedia in Contact Centers
Figure 15: Digitization of Customer Information
Figure 16: Usage of Technology in Operations
Figure 17: Change in Claim Processing Time
Figure 18: Insurance Processes Automation
Figure 19: Usage of Big data in Insurance
Figure 20: Retirement Investments are Heavily Tracked
Figure 21: Risk Profiling of Insurance Customers
Figure 22: Usage of ""Test and Learn"" method
Figure 23: Change in IT Spending
Figure 24: Insurance IT Spending Functional Areas
Figure 25: Future IT Roadmap
Figure 26: Usage of Technology by Insurance Agents
Figure 27: Organization Culture Finding Difficult Dealing with Change
Figure 28: Digital Insurance Business (Embedded or Run as a Separate Unit)
Figure 29: Measuring Innovation
Figure 30: Stakeholders Involvement in Digital Transformation Initiatives
Figure 31: Insurance Industry IT Spending as a Share of Total Business Sales
Figure 32: Insurance Industry IT Spending as a Share of Operational Expense
Figure 33: Insurance Industry IT Spending per Employee ($)
Figure 34: Insurance Industry Revenue per Employee ($ ‘000s)
Figure 35: Insurance: IT Operational vs. Capital Spending
Figure 36: Insurance Industry IT Spending Distribution
Figure 37: Insurance Industry IT FTEs Distribution: Insourced vs. Contractor
Figure 38; Digital Impact on Music Industry
Figure 39: Artificial Intelligence in Customer Experience
Figure 40: Artificial Intelligence in Financial Advising
Figure 41: Artificial Intelligence in Underwriting
Figure 42: Artificial Intelligence in Claims Processing
Figure 43: Macroeconomic Transformation—Platform Economy
Figure 44: Connected Car Insurance
Figure 45: Key Digital Transformation Steps
Figure 46: Healthcare Insurance Customer Journey’s Events
Figure 47: Market Innovators Spend on Market Disruptors
Figure 48: Key Recommendation for Cloud Adoption
Figure 49: Emerging Business Models
Figure 50: Insurers on Digital Path

List of Tables:
Table 1: US Healthcare Insurers IT Spending ($ Million) 2014-2020
Table 2: List of Digital Transformation initiatives Across Global Insurers

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