I bought my house in Plano, Texas, six years ago. Of late, the shingles fall if there is heavy wind and my fence has even started to fall. With high-deductible home insurance, I always opted for quick fixes over a full replacement to avoid significant costs.
Recently, I started receiving calls from a contractor. At first I ignored the sales calls but he kept persisting and finally I decided to hear him out. To my surprise, he offered me a deal where I don't have to pay any deductible to the insurance company. He was basically referring to a capability on paper that you cannot see. This is a curious symptom of a larger trend that's taking hold. Right now the insurance industry is a two-speed boat where the past is fighting with the future.
As we insure every little thing, insurance will move from a risk product to a consumer product. Google and Santa Clara University have launched several trials for driverless cars in the U.S. The property and casualty (P&C) industry will go through a tremendous disruption when the driver doesn't exist and the insured moves from the driver to the car. Insurance will shift from P&C providers to the automobile manufacturers. Likewise, healthcare reform in the United States allows for the opportunity to cross sell between health and life insurance products.
The shifts in business models will dramatically change the way insurance is bought, sold and distributed. The historical strength and pride of every insurer has been agency. The future consumer will want experience, ease and choice. The old model of distribution based on trust, relationships -- the agency -- will face extinction and will move to a more experienced, choice-based, real-time distribution model via Facebook, Amazon, eBay and many other channels. Insurance will no longer be an annuity product or even a term-based. It will be a choice and usage based. If you park your car in the garage then you can switch off your coverage, but if you park your car in a parking lot you should be able to switch on the coverage.
Consumerization will force the death of fixed-cost in insurance companies. Just as their customers are demanding of them, insurance companies will demand variable cost and "pay as you go" models from their suppliers of technology. Large change programs will be replaced by small agile based many projects. Software licensing will be replaced by utility. One of the leading online real estate companies in Australia switches off its entire IT infrastructure every day after close of business. The birth of utilities will emerge and the growth of software as a solution (SaaS) based solutions will accelerate. Projects will be smaller, faster and with continuous rollout of features to all channels -- social, digital and mobile -- and all platforms.
The insurance industry will demand a new, fresh approach to talent building. As the Chinese walls between industries break, many insurers are recruiting people from consumer and other industries such as telecom, mobile and manufacturing. A leading insurer recruited its first chief marketing officer from eBay, and another recruited its transformation officer from GE.
It won't be too long until there will be a green field virtual insurance company which will completely disrupt the way insurance is bought and sold. Underwriting will be on the spot, policies will be simple, customer behavior will be analyzed to petabyte and claims will be handled in real-time with customer interaction at its finest.
This approach will soon become the new Architecture of how things are done.
Nagendra P Bandaru is Wipro's Global Business Unit Head for Insurance. As a part of this responsibility, he manages the entire insurance strategic business unit and owns the P/L. He has more than 20 years of experience in the outsourcing industry with significant exposure to financial services.