A new vision of insurance - picking a business model that will see you thrive

By Martin Stewart : 15th of February 2022

If there’s one thing insurers understand, it’s that the unexpected can happen. But no one could have foreseen exactly how the last couple of years would play out for our world.

The impact of COVID-19 on every aspect of life has been profound and will continue to affect us all for years to come. But that shouldn’t overshadow the fact that the industry’s need for change has been being signalled for some time now.

Now’s the time to take stock, to see what can be learned from the changes the world has gone through and discover if your business is best prepared to operate in the future we’re now facing.

The current state of play

The pandemic and its economic fallout have radically shifted consumer and employee needs, habits, and expectations.

Rapid shift to digital self-service

The drive to find alternatives to face-to-face servicing has, most likely, altered the way many businesses will need to operate forever. Along with this rapid shift to digital communications came an increased demand for a self-service model. Policyholders, already accustomed to interacting with banks and retailers online, are now expecting the same level of user experience from insurers.

The need for a robust digital offering is becoming increasingly vital. PwC’s recent COVID-19 Consumer Insurance and Retirement Pulse Survey reveals 41% of respondents say they are likely or more likely to switch providers due to a lack of digital capabilities, while 15% identify lack of digital capabilities as the topmost challenge while interacting with insurers.

At the same time, the pandemic has had an impact on how people are thinking about their finances and insurance. 37% fear that the pandemic may bring future financial impact on their retirement plan, while 15% anticipate they are likely to purchase life insurance due to the impact of COVID-19.

Growth in direct, digital and embedded sales

Another potential area for growth in the insurance sector is in embedded sales. While bundling travel insurance with a plane ticket or selling extended warranties alongside a product purchase have been around for a while, there’s an increasing focus on opportunities in this area.

The benefit of embedded insurance is that it enables companies to provide customers with what they’re looking for, when they’re looking for them. By offering cover at the same time the consumer is considering buying a product, you’re making things efficient and easy for them. At the same time, it reduces the need for advertising from the insurer because you can talk to the customer at the point of sale. The question for insurance companies is what insurance products can we offer and where can we sell them?

Real-time risk visibility and responsiveness are becoming a reality

A significant change to the insurance industry is the adoption of real-time risk. It’s expected that insurers will be able to use data and analytics to identify and measure risk and use it proactively, in real time, to meet customer needs. It’s even conceivable that responding to a prompt from your fitness tracker to go for a walk could have an impact on your life insurance premium.

Consumers have already become accustomed to their phone or activity tracker providing tailored notifications and prompts. If they’re happy to accept guidance on traffic, weather, or their fitness, it’s no leap to expect them to agree to similar services for risk exposures.

Artificial Intelligence (AI) may be responsible for even more profound changes to the insurance industry, reshaping claims, distribution, underwriting, and pricing. How will the industry alter with the advent of self-driving vehicles, autonomous farm equipment, surgical robots, predictive models that identify fraud, lawyers replaced by AI arbitration services, and other technologies not yet conceived?

The ability to automate claims analysis using AI should result in improvements for both insurers and customers. Customer satisfaction is often tied into claims experiences, with a negative interaction being the primary reason they change insurers. Advanced AI tools will lead to a seamless claims experience that reimburses losses faster and increases customer loyalty.

Why to rethink traditional business models?

Profitability pressure

Today the insurance marketplace is hypercompetitive with extremely tight margins. Operating costs are high and there is limited, if any, growth occurring. According to EY, 30% – 40% of premiums collected goes to distribution and transactional costs. This sees insurers hanging on to a traditional business model are facing ever-increasing profitability pressure.

New market competitors

At the same time, incumbents face the challenges posed by new players entering the market without traditional constraints. 19% of European consumers have expressed an interest in buying insurance from non-traditional competitors, including tech giants such as Amazon and Apple.

Ageing legacy systems

In addition, while insurers may be tired of hearing it; the ageing legacy systems of the old guard are simply not fit for purpose when it comes to meeting the ever-evolving needs of the digital-first consumer. After COVID-19, customers are expecting more flexible and usage-based products that are easier to research and purchase through digital channels.

The need to respond quickly to changing customer demand

In more ways than ever, customers are taking control of retail interactions. Insurers that want to stay relevant in this new paradigm need to be prepared to innovate, test quickly, and continually adapt to an ever-changing marketing environment

What should your priorities be?

The pandemic and its economic fallout have radically shifted consumer and employee needs, habits, and expectations.

Customer experience

Today’s consumer expects more than just fit-for-purpose products and services. 84% of customers say that the experience a company provides is as important as what it sells.

Traditionally, insurance was seen as a grudge purchase, with few differences between the products sold by various companies. But over the past decade, an explosion in the number of different policies and options available has seen buyers become much more sophisticated and demanding. Insurers need to make it a priority to become nimble, deliver quickly, and offer a superior customer experience (CX).

Insurers need to provide a true end-to-end experience that will engage the customer and build a relationship that they genuinely value. This might involve delivering highly personalised offerings that link products to specific life events. With younger consumers waiting longer to buy cars (if ever), own homes, marry, or have children, insurers need to discover new ways to interact with this market.

Omnichannel offerings

Companies should explore an omnichannel approach to interact with customers. You should establish an integrated system that allows for seamless movement from one platform to another.

For example, an agent speaking to a customer on the phone is automatically notified that they just requested a quote on the company’s website and can modify it based on the conversation and send it to the customer’s phone for immediate discussion.

According to a recent report, digital communications should be more widely used. 50% of customers ranked them as a high priority, while only 17% of insurers reported using them. Improving web interactions, increasing digital communications, and developing an omnichannel approach not only gives customers what they want, it offers your business opportunities to save money.

Business agility

The insurance sector has lagged behind some industries in adopting enterprise-wide agility.

While many technology companies and service-industry leaders, particularly those in banking and telecommunications, have gone through agile transformations, a lot of insurers are yet to fully embrace the agile approach.

Now is the time to investigate it. The traditional hierarchal operating model was already becoming outdated even before the pandemic accelerated the need for change. Agile organisations are able to launch new products or update new pricing models 5 to 7 times faster. By simplifying their structure, they simplify governance, increase operational efficiency, and enjoy a 20% to 30% improvement in productivity.

Regulatory compliance

Australian insurers are currently operating in a period of significant regulatory change.

The Federal Government’s Financial Sector Reform Bill 2020 has introduced new regulations, including provisions for financial services industry codes of conduct to be enforceable, with breaches attracting civil penalties. At the same time, the Australian Securities and Investments Commission (ASIC) introduced regulatory guide 271 Internal Dispute Resolution, which necessitates substantial changes to GRC systems.

Insurers need to ensure they have the technology necessary for compliance, a strong risk management framework, and comprehensive audit and assurance functions.


With the myriad benefits of a digital world comes a very big downside – cybercrime.

Only 38% of global organisations report that they are prepared to handle a sophisticated cyber-attack. In spite of increased awareness of the dangers, 2022 is still likely to see the most data breaches ever.

Insurance companies are prime targets as they’re known to store large amounts of information about their policyholders. The financial threat to insurers, if they suffer a cyberattack, is threefold − potential lawsuits from clients, fines from regulatory agencies, and having to pay the ransom in a ransomware attack. Not to mention, the reputational damage caused by a cybersecurity breach. Insurers need to combine the latest in security technology, including artificial intelligence and machine learning, with excellent staff training to reduce the possibility of becoming a data breach victim.

Connecting your priorities to the right technology.

Advancements in technology are opening up the choices for both customers and insurers. For insurance companies, it’s vital that they consider what direction they wish to head in the future. Clinging to the status quo is no longer an option.

Times have changed since being a big, stable, conservative entity was all a consumer wanted in their insurer. While being confident that their claims will be paid is still very important to them, size is no longer a key factor. In a recent US survey, just 37% of respondents “trusted the insurance industry to do what is right”, ranking some established companies below several internet brands that are not nearly as large.

To stay competitive in the market, insurers need to investigate which business model will give them the greatest chance of success. A wide variety exist, here are some of the options:

Digital Led

Offering a full, end-to-end, direct model, focussing on self-service. This requires having the processes in place to respond quickly. Consumers expect self-service to offer immediate results.


Discovering and mastering profitable niche insurance areas.


Gaining distribution by partnering with retail businesses and focussing on embedded insurance opportunities.

Outsourcing processes

Assembling your solution from SaaS providers rather than building it yourself.

Ecosystem building

Establishing an interconnected system of offerings from a variety of providers, which lets customers fulfill multiple needs through one integrated user experience.

Subscription model

Moving from the typical yearly premium to a monthly payment with increased flexibility to modify coverage or add options on-demand.
During the pandemic, many people wondered why they were paying the same rate for a car that wasn’t being driven nearly as much. Technology makes it possible to offer the option of easily turning on or off coverage and features – adding or removing a family member, adding travel insurance when needed, adding locations to commercial policies, and so on.
There’s something even more important than which business model you end up choosing. It’s that you choose one. Trying to move in multiple directions, or not picking a direction at all, is quickly going to make it impossible for your business to compete.

How will core systems need to modernise?

For insurance companies, it really is a case of progress or perish.

The trouble is that the two obvious options both carry considerable risk. Either you try to build a veneer of new tech around your ageing, legacy systems or you take the significant gamble of building a massive new system and bringing it online without doing irreparable damage to your brand.

If your business is operating a legacy IT platform that is functionally adequate but technologically near the end of its life, you could consider refactoring. This involves altering the internal structure without modifying its functionality. There are, however, disadvantages with this approach. By merely modernising the structure, you’re missing out on the opportunity to create a fully integrated system with data architecture that supports digital requirements. And the process can be more expensive than anticipated because the refactored code lacks the architectural advantages of modern programming languages. What’s more, future changes will be complex and time-consuming.

Should you choose to build a proprietary platform, you’re likely to be faced with a more expensive and even lengthier process that will throw up huge challenges when the time comes to transfer systems across. In addition, few insurers have the internal talent that are skilled enough to design and implement a platform that offers the real innovation you need to make your offering stand out in the marketplace.

There is, however, another way to approach the problem.

Accept the need for an end-to-end refresh and take it one step at a time. Proven SaaS solutions provide a streamlined, ready-made functionality for all aspects of insurance − pricing, underwriting, customer self-service and automation, and claims processing. More and more insurers are utilising this approach. In the US, 9 of the top 12 property and casualty insurers use standard software for claims and policy administration.

The benefits of a SaaS solution are clear:

By partnering with an SaaS provider, you can work together to discover ways to make your business more agile and ready to respond to your customers’ rapidly changing needs.


The first thing to recognise is that transforming your business to a new model requires more than simply digitising your existing processes and work practices. You need a plan that will modernise your entire eco-system, making sure that everything is integrated and offers a seamless experience for your customers.

A good rule of thumb is to begin where your organisation’s value lies. Exploit your points of strength and find suitable partners to provide the elements that are better outsourced.

Investigate your SaaS options to obtain near instant, out-of-the-box functionality, rather than spending time and money building systems in-house. And continue to analyse data as you progress to be certain that you’re obtaining the improvements you expect.

Above all, “keep it simple”. The last thing you want is to end up with an unnecessarily large and cumbersome solution that is more expensive and inflexible than the old one.


We are Axe, a leading insurance solution provider helping our customers shift to meet their customers’ needs. We’ve built our reputation on having the most innovative and adaptable software in the market. So, if you’re wanting to change the rules, we should talk.