Insurance is in the midst of a digital revolution. This article explores five basic prerequisites for becoming a successful digital insurer.
Insurance is in the midst of a digital revolution. Customers, especially young people, expect the same kind of personalised digital services delivered by the likes of Netflix, Amazon, Google or Facebook. The mission is to match or beat this standard.
Of the 539 global insurance executives surveyed as part of Accenture’s Technology Vision for Insurance 2020, 82 percent said that their organizations plan to invest at least 1% of the company’s total revenue in new digital technologies.
But spending money is not enough. Digitization needs to be married to a strong strategy. This article explores five basic prerequisites for becoming a successful digital insurer.
#1 Act as if insurance is today a tech-driven business
At Lemonade, AI is embedded in almost all the organization’s workflows. Claims can be paid as fast as three seconds via the app. New entrants will bring their own innovations. In the fall of 2020, the media reported that tech giant Amazon was planning to enter the car and motorcycle insurance market.
The game is changing, and so are its players and rules.
As new entrants like Lemonade or Big Tech players roll-out disruptive technologies, insurers are accelerating the shift to digital. But establishing digital-first operations is not easy, since most insurance companies struggle with old legacy infrastructure and lack fresh talent able to work with new systems. However, “leveraging technology in optimizing process efficiency and operational agility should be at the centre of insurers’ business models”, as EY writes in this article.
#2 Put the customer at the heart of strategy
Customers today possess powerful digital tools to compare products and experiences and switch to the cheapest and most user-friendly providers. Therefore, customer-centricity isn’t just another buzzword. It has become a way of doing business for insurers since the trend is already set by companies outside the insurance industry (the likes of Lemonade or Amazon mentioned earlier).
There are legal pressures too. The European Insurance Distribution Directive, which came into force in 2018, brought plenty of challenges for the insurers, such as pre-contractual information, demands and needs tests, and product management policies.
These days, nearly 40 per cent of insurers say that customer experience is “a critical or a high priority for the organizations”, according to Forrester Research released in 2020, and quoted in a previous FintechOS article.
#3 No blind spots in the process
Is being customer-centric enough? Let’s keep in mind that insurance is a highly data-intensive industry. Hence, “a complete view of customer data is absolutely necessary if insurers want to achieve success in the digital space”, points out David Punter, Product Owner and Insurance SME at FintechOS In short, data must be accessible and aligned to the demands of all involved participants “in every single stage of the process”, he continues.
#4 Relevant data for the relevant persons at the relevant time
At the end of 2020 Caura, the car management app for UK drivers, announced the launch of a new insurance product “that significantly reduces the cost and time taken to insure a car”. With the help of this app, UK drivers can buy car insurance in less than 60 seconds.
What can insurers learn from this move? Embracing a customer-centric business model and securing access to customer data are not enough. Insurers need to be agile, too.
“Make sure that relevant data for the relevant persons are available at the relevant time”, urges David Punter of FintechOS. With the right tools, insurers can today gain real-time insights from IoT devices for efficient data capture. This is what putting data intelligence at the core truly means.
#5 Personalisation is key
How do we deliver the most relevant products to the right customers? This is a question that keeps everyone busy in the digital economy. When it comes to insurance, organizations want to predict when there’s a big life event going on in people’s lives – such as marriage, buying a house, changing job and so on.
Hence, an important action point: feeding each contact channel with the right information at the right moment. Tailoring risk coverage and pricing are important, too. Personalisation is now essential for future growth, and this can only be achieved with the help of a flexible and modular architecture, powered by embedded digital tech.
To sum up, as a key take-away for 2021 and beyond, Deloitte believes that “generating continuous innovation in insurance policies, sales strategies, operations, and customer experience could turn out to be the biggest differentiator.”
This article is part of a series of articles dedicated to the insurance industry. FintechOS talked to leading companies from incumbents and start-ups to accelerators and consultants, to get to the heart of the questions: What does digital transformation look like?
Get actionable take-aways on how to stay on top of industry trends, enhance digital strategies, address current challenges and accelerate innovation: https://finvision.fintechos.com/
Other articles on insurance:
Customer-centricity – A Matter of Cultural Shift
Insurance: What’s On the Horizon?
Life Insurance in the New Normality – Three Take-Aways
How Insurtechs Are Winning Trust
Insurance: The Root Causes of Low Trust
“No Legacy Issues to Deal With”
Claims Management: How To Do It Right
“If Not for the Technology, The Business Might Have Been Shut Down Because of the Lockdown”
Insurance: The Scale of The Crisis
The Greatest Challenge Facing Insurance
What’s In Store For Insurance