Insurers of the future must innovate in everything they do, from their business models to products and services, infrastructure and customer approaches, a new research report from Boston-based strategic advisory firm Strategy Meets Action (SMA) concludes.

Carrier Management asked report co-author and SMA partner Denise Garth to highlight some of the specific concepts in SMA’s report, titled “The Next-Gen Insurer: Fueled By Innovation.”

Her summary is below:

Why is innovation so crucial to the future of insurers?

Innovation is a crucial strategic mandate that is defining a new era of winners and losers. From retail to entertainment and now to insurance, decades of business traditions and assumptions are toppling due to change—change that runs the gamut from customer behaviors and expectations to the use of new technologies.

This level of disruption and change is unprecedented in the insurance industry and impacts everyone. Companies from startups to those from other industries or backgrounds are entering the insurance business and embracing the levers of change, creating new competitors that are not shackled by decades or centuries of tradition.

What are the “outside in” influencers fueling this change?

These influencers include global and local economic factors of slow growth and low investment returns that have uncovered and underscored the longer-term challenges for the industry, pressuring insurers to rethink and reimagine and seek new and innovative business and revenue models.

Other industries like entertainment, automotive and healthcare and companies like Google, Facebook, Amazon and Monsanto are redefining and reshaping the customer experience while broadening their customer relationships, thereby threatening traditional insurer relationships.

There are also next-gen and emerging technologies such as wearable devices, telematics, big data, driverless vehicles and the mash-up of these technologies that demand us to do different things that will reimagine insurance.

Finally, there is an explosion of data—the lifeblood of the industry—with massive new sources of data from third-party providers, new devices, new technologies and new business like social media.

The dawn of a new future is rapidly taking shape, accelerated by these powerful “outside in” influencers converging and affecting every touch point of the insurance value chain, reshaping customer experience and altering business assumptions. Whether insurance companies acknowledge and embrace this change will determine if they rise to the new expectation or fall by the wayside.

How do you define a next-gen insurer?

The next-gen insurer reimagines the fundamentals of insurance, including customer, products and services, infrastructure and business models to create new levels of agility and competitiveness while harnessing the unique expertise of the company to survive and thrive in a rapidly changing world.

With so many examples of success outside the industry to look to, and the accompanying allusions of what failure to innovate can mean, insurers can learn much. The coming years hold an unparalleled promise of opportunities to increase customer value, engagement and loyalty for insurers.

Those that embrace innovation and capitalize on the disruption and influencers stand to make the biggest gains. Those that hesitate will fall short in both competitive position and financial stability.

So what are the steps insurers should take?

First, recognize that the innovation journey has started—whether yours has or not. The longer you wait, the more difficult it will become and the more detrimental it will likely be to your long-term business. Zero in on your vision of the next-gen insurer to guide your innovation journey.

Second, the possibilities for innovation are vast, but they need the ingenuity and momentum that can only be provided by the boundlessness of the human imagination. Identify those individuals within your organization who are outside-the-box thinkers—those bold dreamers and visionaries who can be advocates along the journey.

Third, recognize that no business can exist and thrive without collaborating with others. Most insurers lack the time, expertise and resources to track all of the influencers and must engage the support of some outside industry resources. Insurers must identify the partners who can mobilize an ecosystem of relationships and resources, with an outside-in view, to capture the potential, cultivate and accelerate the innovation journey.

Finally, create, nurture and inspire a culture of innovation. This culture must start at the top and be visibly seen, heard and acted upon each and every day.

The reinventing, reimagining and rethinking of the business of insurance is underway. No business can expect to harness the future and all its conceivable possibilities on its own. Those who embrace innovation ecosystems can fully capture the potential, change legacy cultures, and enable ideas and technologies to be uniquely operationalized within their companies, forming their own, distinctive version of the next-gen insurer.

It’s a journey of possibilities and promise.