How to Stay Competitive with Business Model Innovation in the Insurance Industry

by Prof. Dr. Claudia Lehmann | April 04, 2020
A study on business model innovation in the insurance industry was published in the renown insurance magazin Zeitschrift für Versicherungswesen (ZfV). A huge success for the team of the Center for Leading Innovation and Cooperation (CLIC) and HHL research.

HHL research published in renown magazin for insurance ZfV

Huge success for the team of the Center for Leading Innovation and Cooperation (CLIC) and HHL research: In December 2019, one of Germany’s most important magazines for insurance industry (Zeitschrift für Versicherungswesen – ZfV) published an article on “The Future of Insurance Companies – Perspectives for Business Model Innovation” by HHL part-time MBA student Simon Meier, CLIC PhD student Tim Mosig and Prof. Dr. Claudia Lehmann.

For almost 70 years, ZfV has been providing excellent specialized reporting in the insurance industry and thus can provide a good insight into current developments in the insurance industry, such as the mentioned article with research in the areas of business model innovation and digitization in the insurance industry.

“A much stronger focus should be given to human resources, as this is where most of the success factors for business model innovation in the insurance industry occur.”

Challenges the insurance industry is facing

Like many other industries, the insurance industry is facing enormous challenges due to the dynamics of digitization and the pressure of a successful digital transformation. In addition to changing customer requirements and the influence of financial markets, the business models of insurance companies must be questioned and reconsidered in order to successfully meet the digital transformation.

Results of 32 interviews – with representatives of the middle and upper management of German insurance companies – led to a new, transformed concept for the business model of the insurance industry. The elements of the newly transformed business model are summarized and explained in the article by Simon Meier, Tim Mosig and Prof. Dr. Claudia Lehmann.

Examples for those elements are the increasing importance of IT for all processes and activities as well as the new elements of prevention to become a major focus for insurance companies. Furthermore, the article presents five possible as well as potential business models of the future in the insurance industry based on the interviews. Those are (1) IoT and Prevention, (2) Make more of it, (3) Orchestrator, (4) Peer2Peer, and (5) Carer.

Stronger focus on human resources needed

The results of the interviews have indicated that a much stronger focus should be given to human resources, as this is where most of the success factors for business model innovation in the insurance industry occur. Further, technology is a significant success factor for business model innovation. Despite the many possibilities and opportunities that digitization offers us today, companies are constantly faced with challenges, obstacles and barriers. Three dominant groups of barriers – regulation, industry identity, and competition – were identified in the interviews as obstacles to business model innovation in the insurance sector.

“Regulation, industry identity, and competition were identified in the interviews as obstacles to business model innovation.”

New competencies are needed to meet the challenges of digital change – not only in the insurance industry, of course. Openness and willingness to change and lifelong learning are only a few of these necessary competencies in times of digitization. The results of the interviews on the topic of business model innovation were moreover used to derive implications that are intended to serve as a thought-provoking impulse.

Research presents implications for the industry

To begin with, the authors recommend insurers to create activities and offers for the prevention of harm proactively. Further, insurance companies should assess their governance structures to consider increased cooperation with external partners. Another implication is the utilization of new technology as a chance for improving internal processes as well as interactions with customers and partners. The fourth recommendation provided is to integrate employees into the change process as early as possible for higher acceptance and to increase efforts for programs to promote the development of digital competencies of employees.

The published article based on the master thesis of Simon Meier is one of the longstanding and numerous activities of CLIC in the context of digitalization and the insurance industry and thus fits seamlessly into the strategy and objectives of the newly founded chair for LF Group Digital Innovation in service industries, to which Prof. Dr. Lehmann was appointed at the end of 2019. In this context, the LF Group also includes the insurance forums in Leipzig with a long tradition.

About the authors

Simon Meier, part-time MBA at HHL Leipzig Graduate School of Management (P12C) recently finished his master’s thesis on “Business Model Innovation in the Insurance Industry” and works as an innovation scout at Ergro Group AG and creates cooperations with start-ups.

Tim Mosig, PhD student at the Center for Leading Innovation and Cooperation (CLIC) at HHL with expertise in data-driven business model innovation and digitization.

Prof. Dr. Claudia Lehmann, Executive Director of the CLIC at HHL with proven expertise in the areas of service innovation and digitization as well as long-term cooperation with insurance companies and most recently holder of the professorship for Digital Innovation in Service Industries at Leipzig Graduate School of Management.