Although slow to adopt digital, the insurance industry should look at the many benefits this offers, rather than focusing on the challenges it creates.
In our last blog, we looked at why the insurance industry has been so slow to digitize and the challenges it faces. Not only from an increasingly technological future but also from new, non-traditional competitors, who are likely to do digital that much better.
This threat alone should be reason enough to convince insurance organizations that they need to overcome the many difficulties and challenges this new era poses, in order to remain industry leaders. However, there are many benefits to be had from moving in this direction. Let’s look at a few of these.
It is clear that customers’ expectations have been transformed by digital technology. Consumers are used to operating online, having access to all the information they need at their fingertips and making quick and easy purchases via digital channels. So it comes as no surprise to realize that they expect the same type of service from their insurance provider as they get from their other service providers.
They demand 24-hour access and rapid delivery. They expect clear, concise and relevant data about a product’s features. They want accurate information in regard to pricing, and they expect innovative services tailored to their individual needs.
If they are to survive in a digital market, insurers will simply have to deliver on these needs, those who dive into digital sooner, rather than later, will be the ones to get their noses in front – and in this era of narrow margins, that may be all the lead they need.
Show me the money
One of the key short term benefits that will come along with meeting these customer expectations is the chance for these players to improve profits in their core business. McKinsey¹ points out in a study that higher customer satisfaction, coupled with better service and the faster processing times that digitization delivers, is a clear driver of customer retention. Customer retention inevitably translates into more profit.
Of course, it is not only about the customers – the simple fact is that digitizing your current business will eliminate significant costs throughout your value chain. According to the report, automation alone can help a business to reduce the cost of a claims journey by as much as 30%.
What of revenue improvement opportunities? Digital technology offers organizations the chance to change the notion that insurance is a low-engagement category. The massive amounts of data available today, coupled with high-quality analytics, means that insurers are now afforded the opportunity to get to know their individual customers more intimately.
Greater knowledge of the individual customer means they can price and underwrite more accurately, not to mention it offers the kind of insights that enable better identification of fraudulent claims.
Knowing more about each consumer allows for more individually-tailored products, such as vehicle insurance, where rates can be charged according to the mileage driven.
For example, when a policy holder put their house up for sale, the insurer would not know of this. However, in today’s highly connected world, such knowledge becomes the springboard for agents to seek to upsell new home coverage, maybe new auto coverage, not to mention the possibility of adding some life coverage, to help the client cover their mortgage on the new house.
The long view
It is not only in the short term that such benefits accrue. In the longer-term growth can be achieved through the development of increasingly innovative insurance products and protection services. A good example is how growing concerns about cyber-security may well create a demand for coverage that protects a business – or homeowner – against the loss of important data.
Digitization of other industries will also have a spin-off effect. The rise of apps like Airbnb should also be viewed as an opportunity for the industry to tailor specific products towards those homeowners who choose to take in guests via a service like this.
Of course, digitization is only the enabler for the above. A company that wishes to move into a digital future successfully will also need someone who can conceptualize and design these new and innovative insurance products. An employee who can focus on creating great customer experiences and ensure the entire organization is operationally efficient.
Ultimately, the digitization decision is one every insurer is going to eventually have to make – the only choice that is truly available to them is whether they choose to be one of the disruptors, or one of the disrupted. Only by acting decisively on the issue of digitalization can they hope to be among the leaders of tomorrow.
[About the author] Dylon Mills is the Director of Marketing Content Strategy & Development at Uniphore. As such, Dylon’s main responsibilities are to strategize, create and deliver content for Uniphore’s product portfolio that align with the global Go-To-Market strategy, corporate positioning, and marketing campaigns. Dylon’s prior work experience includes Product Management at one of the top Fortune 500 Technology companies, Symantec Corporation. Outside of work, Dylon enjoys problem-solving and any project that includes building/tinkering with tools. Dylon holds a BS Consumer Economics from the University of Georgia.