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McKinsey has the counterintuitive view that the digital dawn in insurance actually destroys value---transferring power from the carrier to the customer and eroding profits. In the United States, McKinsey estimates auto insurance premiums could decline by as much as 25 percent by 2035 due to the proliferation of safety systems and semi- and fully-autonomous vehicles.
Against this backdrop, we interviewed some 30 executives in incumbent and attacking companies to understand their views on how the industry is changing and how to respond. The single message most constantly repeated was the need for incumbents to accelerate their response (see sidebar, “The need to commit to speed”). Most know they cannot afford to wait until evolving technologies turn the market upside down and the competitive advantages they enjoy today evaporate. If history tells them anything, it is that they need to get ahead of the curve. And they will need to do so at scale, ultimately transforming the entire business. What holds them back, however, is deciding how to address the challenge given its enormity.
