Financial services is undergoing a digital revolution. Far from a one-off software upgrade, the future of banking and insurance involves a constant digital iteration on services, platforms, and tools.
Yet, banking seems to have made more progress on this than insurance. In fact, according to Deloitte, 48% of responding insurance executives agreed the pandemic “showed how unprepared our business was to weather this economic storm”.
As Bryn Barlow, partner at ISG, explained “all the big insurers are wishing they’d made more ground in artificial intelligence before COVID-19 hit. For some, 60% of their processes still rely on paper. That makes everything harder now.”
Why is the insurance industry so reliant on paper? Well, put simply, it’s all about risk.
Historically, to underwrite a risk, insurers have relied on vast amounts of customer and risk data. That information can go back years, and in some cases, reside in a variety of legacy systems, spreadsheets, and in some cases, filing cabinets…
It’s all very well to plan to migrate to the cloud, but getting all that data into one place is a gargantuan task. Thankfully, technology has come to the rescue.
Systems like the FintechOS platform can now link all your legacy data without the need for migration, giving you instant access to digital tools and customer experiences.
This means insurers are now able to catch up to their banking colleagues in their digital transformations with relative ease. Even better, you can learn from the teething troubles and challenges that your banks have faced in their move to digital.
So, what can we learn from banks about perfecting digitization?
The customer, as they say, is always right. That’s largely because their money pays our wages. If they aren’t happy, they won’t choose you.
This has never been more true. With the number of start-ups and insurtechs entering the market and the ease of switching between providers, it’s now vital to give your customers what they want, when they want it.
So, what keeps customers around? Mainly digital, it seems. According to PWC, 41% of customers would switch provider due to a lack of digital capability. That means that insurers slow to digital are losing almost half of their customer base.
Offering customers a digital journey that can be completed remotely, with the support of automation, is not just a key differentiator, it’s quickly becoming a basic necessity. Customers expect to be able to make mobile payments, sign agreements electronically, and use multi-factor or one-time passcode (OTP) verification for extra security.
Yet, these features of the digital customer journey are just the beginning. The true power of digital comes with personalization.
Banks are already using customer data to provide personalized experiences. Since insurers need to gather at least as much information about their customers during onboarding to confirm their risk, why not make use of it?
Artificially intelligent (AI) tools can easily make recommendations to customers about which products might be right for them and even create tailored cover. Yet, this doesn’t just keep customers happy, but also regulators….
If you’re using your customer’s data to choose the right products for them automatically, then you can also use it to make sure they aren’t being missold, and give them accurate advice about your products. This will keep the regulators happy, and also act as a differentiator for your brand and enhance trust.
Imagine a customer is purchasing an insurance product from you, but they receive a pop-up advising them that this might not be right for them and suggesting an alternative. Since you’re focused on their needs instead of your profits, they’ll trust you more, and also might be put off going to a competitor in future for fear they won’t see such a pop-up when making a wrong decision.
According to Statista, 73% of US commercial insurance is still purchased through a broker. That’s because SMEs value the advice of their broker; not just on what insurance they need, but also on risk prevention and resilience. If you could automate this advice, you could bypass the brokers altogether, at relatively little cost.
At FintechOS, we don’t believe in ‘digital transformation’. The term implies a one-and-done process of moving to the cloud. That’s not going to help for long.
Every time new technology comes along, you need to embrace it. That means embedding a culture of constant digital iteration, and insurance innovation, into your entire organization.
Barclays bank is already making this work across their business, and insurers could benefit from a similar attitude. Gathering ideas from your workforce using the latest tech, and brainstorming those ideas into solid plans, can yield tremendous results.
We often talk about ‘watercooler moments’ where great ideas come up in casual conversation when your people are in the same room. This is a particular hot topic as remote working has become the norm.
Yet, watercooler moments only happen in small, isolated teams. What if your marketing team have a killer idea for a product that they never get to share? What if one of your cleaners has a million dollar idea?
Sourcing great ideas with digital tools like Starmind, frees innovation from the watercooler. That’s exactly what Barclays are doing, and they were also one of the first banks to really embrace fintech disruption.
Incumbents tend to look at tech-savvy challenger insurers as their competition. It’s too easy to see these firms as upstarts who are luring away your customers, when what you need to ask is: what are they getting right that you can do too?
As I mentioned above, incumbents have a huge amount of actionable data on their clients and the risks they face. If you can use the latest insurtech to connect and analyze that data, then use AI to act on it, you’ll be in a much better position than a challenger insurer with all the tech and no data.
Whether it’s using technology or actively working with challenger insurers, the insurance industry needs to embrace in-house and publicly available data, and the latest tech to truly thrive. We’ve seen this working as the industry got together to make it through the pandemic, but it truly is the future of the insurance sector.
Through the use of application programming interfaces (APIs), data no longer needs to be siloed in one place. It doesn’t even have to be siloed in one system. In fact, it doesn’t have to be siloed in your company.
Think of APIs as Netflix. The digital copy of the film you’re watching exists in Netflix’ server, but you can watch it on your TV in your home, on your computer, or on your mobile anywhere in the world. That’s exactly how your data can function.
If your life insurance customer decides to take out health insurance with you, you can take all their information – from their identity to their medical history – and transfer it to your health insurance system through an API.
This means you can offer them more cover without them needing to fill in any information again. They can be insured within minutes.
It doesn’t just work one way, either. As well as sending customer data to another system, you can also send your product information to new customers.
Perhaps your brand doesn’t appeal to Gen-Z? You could set up a subsidiary with a trendy new brand and offer the same products to a whole new customer base through an API.
Maybe you’re a specialist in a particular type of insurance that another firm doesn’t offer. Perhaps you can insure rare, classic cars where most can’t. You could arrange a deal whereby competitors who can’t insure those cars could offer your specialist classic-car insurance to their customers through your API.
If you’re feeling really crazy, perhaps your APIs could even span different industries.
Heavy regulation made the concept of bancassurance unfeasible. Offering insurance as an add-on to banking customers was once a great way to upsell, but regulators insisted that banks had to offer equal advice and services to their insurance customers as they would receive through a dedicated insurer. This made it too costly.
APIs, however, will allow you to offer your insurance products and robo-advisory to customers of any business, including banks. There’s plenty of evidence to suggest that customers want to access all of their financial products from one place. The possibilities for digital bancassurance are endless.
So, how can you take advantage of all this? You’ve learned your lessons from banks and you’re ready to start your digital journey. How can you get started with customer personalization, robo-advisory and APIs?
The key is bridging that gap between the data you have siloed on paper in filing cabinets and the fintech tools that feed on that data. Unfortunately, there’s no way around getting paper information into a digital format, but there is a halfway point.
Our vision at FintechOS is to see the fintech tools you need stretch closer to meet your legacy data where it is, without the need to migrate everything into the cloud first.
To find out more, check out our website or book a demo.
