The impact of the digital revolution on insurance companies
Insurers today are facing a changing consumer and technology landscape. On Thursday 17 July 2014 SSP hosted a breakfast seminar where industry experts Rhys Collins (SSP), Martin Vipond (KPMG), and Craig Beattie (Celent) discussed the journey from legacy systems to digital.
Vipond said the amount of mobile traffic is 18 times higher than internet traffic. He said that technology is changing the competitive environment for insurance companies.
Technology has brought about a cultural change in how ready consumers are to interact with insurers using digital. He said a common trend among the younger demographic is an accelerated adoption of 24/7 connectivity, and young people seeking advice and validation online.
The valued insurer – a vision for success
Vipond said when it comes to products and markets, the insurer must have a clear understanding of customers and how they behave. This understanding must reflect in the features around the product. The product and policy must be simple and easy to understand. Vipond cited www.hioscar.com, a New York based medical insurer aimed specifically at young people living in New York, as a good example of how a company can use technology to make a product simple and presentable in a way that works on mobile phones.
Vipond spoke about channel integration – using a mix of traditional and digital channels to serve the customer. He said that the majority of people want to research online but purchase offline.
Vipond said more and more people, especially in Africa, have chosen mobile over desktop. Insurers in turn need to think about doing mobile first and desktop second after that. Facebook, for example, tests all their products on mobile first. Facebook has 32 billion posts a day – 250 million of those posts are mobile only and originate from the developing world.
Vipond said that a separate digital strategy is the wrong strategy. Digital needs to be incorporated in the overall business strategy. He said digital integration doesn’t have to be expensive. The trick to start is to find areas that are cheap to implement, for example giving brokers tools to interact via social media, which are low cost and quick to do.
“Any strategy should encompass an inclusive strategy to brokers,” he concluded.
Digital consumer experience
Craig Beattie said the concept of digital in insurance is often about getting billing right, “digital is often only about front-end capabilities”.
Beattie said the term ‘digital’ refers to the continually adoption technology. Digital is adopted at a quickening pace, and the question companies ask is, how do we adopt technology quicker than we are right now?
Beattie said telematics – for example Google, self driving cars, global licences – could mean the end of motor insurance, as they are designed to bring down premiums.
Insurers need to change with the digital environment by changing the game early on. Ask yourselves: how do I support my clients when they’ve had a loss? Digital cannot take away the human element. This is where relationship building is important.
Telematics is about understanding what your clients are doing, what risks they are taking, and informing them so they can make informed decisions, said Beattie. Technology also helps the insurer to mitigate own losses and give value to customers, he added.
All of the insurance industry can do this, not only motor insurance. At the end of the day technology can help you forge a partnership with your client by adding value to their lives.
Not all digital is good
Beattie said the UK banks and government have invested in infrastructural changes in the economy, to educate the consumer about doing banking online. The result is a well educated consumer who does his own financial services online without a broker.
This resulted in a boom in, for example, price comparing websites, which in turn brought down the price of insurance. This has brokers asking, how do we get online and sell insurance without the same marketing budget?
With this came a major paradigm shift in distribution which in turn has reshaped the market. Beattie said the influence of the intermediary drops as product commoditisation increases.
Beattie said we now see questions regarding insurance appearing in Google searches. Consumers are switching to alternative, unregulated channels for advice. Beattie argued that the UK is too focused on digital for digital’s sake.
Beattie said digital is still ill-defined, although people have an innate sense of what is and isn’t digital. He said digital is becoming easier to define, as it does not require rigorous measurements to be intuitively useful. He concluded that more digital is not always better. Technology is a good fit for simple products, but when it comes to complex products which require advice from a professional, the human element cannot be erased. He said some markets simply aren’t ready for digital, and digital typically reduces profits in the industry.
Annetjie van Wynegaard interviewed Rhys Collins from SSP, watch the video below:
Annetjie Van Wynegaard