Insurance needs to keep up with the digital transformation. How and why? Here are the top 3 trends that will shape the business in the near future.
- If insurers are not careful, they may be pushed out of having a direct relationship with customers;
- Insurance is a highly data-intensive industry. How can big data be related to the digital transformation?;
- Compliance will continue to remain a top priority for the insurers;
If you work for an insurance firm, and happen to shop from Amazon UK, it is very likely that you’ve noticed how openly and fast the online retailer seems to respond to customers’ concerns about protecting their products.
“Extended warranties, accidental damages and theft insurances are available for purchase (…). If you wish to cancel your insurance policy, you can do so (…),” states Amazon UK on its website. More than that, “Amazon Protect team should respond in one business day”. One business day.
A ‘born digital’ or digital native generation expects quick access and a friendly shopping experience, no matter the purchase – a new watch, a room for the holiday, a ticket to a football match or an insurance policy. That’s exactly the business philosophy that Amazon, today a multi-billion dollar business, was built upon since the very beginning, in 1996, “to be Earth’s most customer-centric company”.
What would be the key lesson from Amazon for insurance companies? “Insurance players have to redesign their core processes, products and services around their customers”, thinks Marius Lazia, Insurance Product Owner with FintechOS, a London-based tech company whose centrepiece technology puts automation and personalisation at the heart of innovation.
Lazia, 38, who has a 20-year experience in insurance, has made a list of three trends that will shape insurtech in the near future.
1. Focus on experience
User experience has been dramatically influenced by tech giants in the past decades. “If insurers are not careful, they may be pushed out of having a direct relationship with customers and be relegated to the role of a price-driven risk carrier at the back end”, according to Insurance Business UK, quoting GlobalData, a provider of data, analysis and solutions to companies in large industries.
The KPMG network of insurtech professionals, in collaboration with The Digital Insurer, a dedicated knowledge base on digital insurance, stated in a report released last year that 73 percent of insurance CEOs agreed that they are “personally prepared to lead the organization through radical transformation to remain competitive”.
Companies that place the customer at the centre of an insurer’s processes get valuable insights into what customers really want – and how they prefer to be engaged.
2. Data intelligence at the core
Insurance is a highly data-intensive industry. How can big data be related to the digital transformation? By putting data intelligence at the core, experts say.
Let’s look at an example to illustrate how to turn big data into a great business by looking at weather. In 2016, IBM, a global leader in computer solutions, bought The Weather Company (TWC), which provides media channels, governments and 40% of the airlines worldwide with 25bn daily forecasts. That implies 400 terabytes of data – 33 times the amount Twitter stores every 24 hours, according to The Economist.
While IBM is squeezing good money out of big data, “many property insurers, whose fortunes rely on forecasting climate-induced losses, are still learning how to use the information”, says Leon Brown of TWC, quoted by The Economist in a 2019 edition.
Only reinsurance firms and some Asian insurance companies seem to innovate in this business, some experts say.
3. Compliance – a top priority
Consumer data protection has been triggering much media attention since 2018, when the European GDPR data protection policy was enforced.
At the same time, the European Insurance Distribution Directive, which is in force since 2018, brought plenty of challenges for the insurance players, i.e. precontractual information, demands and needs test or product management policies in order offer relevant products to their customers.
Compliance will continue to remain a top priority for the insurers. Therefore, the industry expects a stronger push toward adopting standard software to check a company’s right to make use of consumer information.
As a key take-away, Marius Lazia of FintechOS concludes that the most successful players in insurance will be those who will improve existing products around user experience, and who will put data intelligence at the core. “No need to reinvent insurance. Just make it work for today. That means making policies be more transparent, providing better user experiences and, borrowing an acronym from AI field, bringing FATE* for your customers”.
Whitepaper – How insurers can compete with insurtechs and win back customers.
*FATE – Fairness Accountability Transparency and Ethics
Disclaimer: This article was compiled based on publicly available information released by owners*. It is not intended to be viewed, nor treated as an official source of information.*The sources consulted for this article: Deloitte – “2020 insurance outlook” (2019); KPMG International’s Global CEO Outlook & The Digital Insurer (2019); The Economist; Insurance Business UK; CSO Insights; Amazon website; FintechOS competitive intelligence analysts (2020).
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