Globally most insurers seem to be left behind by the rapid changes in customer expectations. The insurance covers have become progressively commoditized and choice over its purchase is almost determined by price, as many customers fail to recognise its value. Megatrends are also redesigning the competitive environment for insurance companies and the market in which they operate. Insurers need to be looking at how to keep pace with the sweeping Social, Technological, Economical, Environmental and Political developments ahead.
Digital holds the key to customer connection, digital innovation can help insurers to engage more closely with customers and it can open up untapped commercial opportunities.
Digital is the term we use to describe the leading-edge collection of 'SMAC' (Social, Mobile, Analytics, Cloud) developments in customer expectation, behaviour and interaction, which are rapidly reshaping the rules of business:
Social - customers are increasingly using social media to find out about insurance products and how others rate the services.
Mobile and sensors -Mobiles and sensors offer insurers a regular source of information into how customers go about their daily lives, which would enable insurers to price risk more effectively.
Analytics - using the wealth of data created through social, mobile and sensor channels offers huge opportunities including sharper customer profiling and pricing of risk.
Cloud - cloud computing frees insurers from the constraints of on-premise IT and allows them to move to a more flexible technology platform. Cloud enables insurers to innovate and try out new services and solutions for customers with much shorter lead times.
Digital innovation has been the facilitator for the customer revolution; nevertheless it can also offer the opportunity to develop the sharper customer engagement, vision and understanding needed to meet these more challenging demands. Whereas most insurers are still primarily focused on e-commerce, the leaders are evolving deeper, more personal and extensive relationships by using their digital competencies to gain and greater information of their customers. The competitive gains consist of being able to move away from simply contending on price, while more effectively governing risks and matching the capability being offered by the contestants targeting their segment.
Though technology is going to be an important part of insurers' ability to capture and analyse new sources of customer data and develop deeper relationship. Yet the real differentiator is how well this information is turned into perceptions and willingness to lead the innovations in the open market. What this demands is as much of a cultural leap as a technological shift. This includes comfort with big data decision-making and the ability to bring creations to market with much greater speed and flexibility than today.
This article is based on PwC's 'Insurance 2020' digital insurance survey 2014, where 9,281 consumers were surveyed in May 2014 across 16 countries. The participants form a representative sample of ages, genders and income groups in Brazil, Canada, Central & Eastern Europe, China/Hong Kong, France, Germany, India, Mexico, Netherlands, Singapore, South Africa, Spain, Switzerland, Sweden, the UK and the US.
The survey findings provided valuable insight into how digital is reshaping buying habits and how companies can capitalise on new market openings.
-- Around 70% of consumers used some form of digital research before buying insurance (eg price comparison or social media)
-- Over a 25% bought their policies online (eg web or via a mobile device)
-- Nearly 70% would be willing to download and use an app from their insurance provider
-- 75% would be willing to have a sensor attached to their car or home, provided the end result is a reduction in premium.
-- Over 50% would be prepared to provide their insurer with additional personal and lifestyle information to enable them to seek the best deal for relevant services on their behalf
-- 49% of US consumers would be prepared to provide their insurer with additional personal and lifestyle information to enable them to seek the best deal for relevant services on the their behalf
-- 36% of consumers surveyed felt that they would need telephone support at hand if they were to purchase online.
-- 50% of policies in the UK were bought online
Customers have access to more information than ever before, at the same time, customers want insurers to propose them the simplicity and approachability they've become comfortable to in other sectors. They want quotes and prices when they want via the platform they choose, access to help when they need it and to only interact when renewing or making a claim. Where customers are looking at value rather than just price, they want policies tailored to their requirements and to be only paying for what they need.
What emerges from this research is how strongly embedded digital already is within the market and the potential to take the engagement and commercial possibilities.
In the past, digital business meant e-commerce. But the landscape has changed; the rapid rise of social media, smart devices, big data and cloud computing has opened up new avenues of potential. Social media customers are changing too through demographic change, increased expectations and empowerment. Technology and social media are making customers better informed, more connected and more vocal. Smart devices, sensor technology, wearable tech, big data and analytics cloud computing
By 2017 a new breed of customer will dominate - we call them Digital Natives
-- Traditional Consumer
-- Transitionals
-- Digital Natives
What does this mean for business? As a result, businesses have changed to deal with:
Adding value through digital, three influences of change are taking place:
1. Businesses have the precise combination of digital channels to improve customers' e-commerce experience and effectively integrate their physical and digital operations.
2. Businesses exploit information gained from how customers want to use their products and services to develop new proposals that help customers improve their lifestyle and increase their loyalty.
3. Customers' digital identity will become multifaceted. The more they interact with business's products and services, the more understandings they will gain about themselves. That then offers an opportunity for a 'digital identity manager' to work on their behalf to get the best deals.
...which means businesses need to become more customer-centric
Digital is a catalyst and accelerator of 'total-customer centricity':
It is not like being just additional channel, the effect of digital is converting what customers expect, generating fresh opportunities to get closer to the customer and moving insurer from a price to a value consideration. Indeed, instead of digital strategy, the main objective for insurers should be developing a business strategy for the digital age.
What insurers know about their customers is still very much focused to an individual product view of risk, understanding the individual risk rather than the customer and their needs. There is need for more developed profiling techniques which will enable closer tailor interactions, products and services to a customer's exacting needs.
What underlies these developments is an important shift from the insurer being a reactive claims' payer to a proactive risk manager. By helping customers to understand and mitigate their risks more effectively, the true value and differential of insurers' risk management expertise would become more tangible and they would be in a better position to increase their prices and returns.
(The writer is Chief Risk Officer - EVP )