Today’s insurance customer is connected, self-educated, and highly conscious of price and value. And to appeal to this digitally-savvy audience, insurers need to embrace new technologies and offer greater flexibility and access across their services. However, with only 7% of services currently provided through digital channels, most have a long way to go before they can boast about being a digital insurer.
The insurance market is ripe for disruption. And for those who do not see this urgency or are unable to digitize their products and services, expect to slowly fade into the background. Consider this: 37% of customers have switched their insurers and the churn rate is rising, up 13 percent over the last few years.
New digital businesses are disrupting the market through the rapid delivery of digital products and services. And the threat from outside competitors continues to increase. In fact, 65 percent of insurance CEOs see new market entrants as a threat to growth. With more options on the market, expect customer loyalty to wane.
One insurance startup that is disrupting the industry is Oscar, an all-digital health insurance tech company that allows users to be onboarded in minutes, search for doctors based on expertise and cost, and even be financially rewarded for walking and running more than usual (the app tracks your step count). With a current valuation of approximately $3 billion and over 125,000 customers in just over two years, Oscar is aggressively ramping up to become a bona fide disruptor in the health insurance industry.
Will you be disrupted, or are you a disruptor? More than 80 percent of insurance leaders believe digital disruption will transform not only how they interact with their customers, but also how they manage their traditional processes and operations.
To compete with the new breed of tech-savvy startups, innovative tech giants, and established players, insurers need to make application development a core competitive advantage to support new business models, drive greater customer engagement, and streamline internal processes.
The greatest return on investment for digitization projects comes by focusing across three core areas:
1. Product Innovation:
Are you able to customize a wider range of products and distribute across digital channels? Both customers and brokers expect more targeted products, and they want to access those products through digital channels. Many insurers are under the impression that when thinking about digital products they need to come up with breakthrough new products in order to successfully compete and disrupt the industry. While insurers should test disruptive ideas, they can also deliver value quickly by focusing on adjacent product innovation.
Simply put, adjacent innovation includes taking existing products into new markets and digital channels, or creating new digital products for existing markets. New technologies like wearables make existing products more tailored and user-based, new channels can help insurers sell these products in new and innovative ways that resonate with the customer better, and new customers can reshape an existing product to create an entirely new offering.
2. Customer Experience
In many ways, digitization ties into engagement as customers and employees now expect a seamless experience across every point of interaction. However, only 1 in 10 insurers has aligned its digital strategy to maximize effectiveness across the full decision journey. Have you optimized your sales and service channels? Do customers and brokers have easy access to the information and assistance that they require on any channel?
Consider how you can simplify your sales and service channels, including broker performance management, guided selling or advisement tools, customer self-service, electronic first notification of loss, and automatic underwriting. The objective is to simplify the process to ensure that information is easy to access and transactions are seamlessly processed. It is also important to make sure the experience is seamless across multiple product lines to maintain consistency.
3. Opperational Efficiency
Efficient operations are critical to running any business, for example managing complex claims handling, rating and underwriting, fraud workflows and renewals. The typical margin for a GI product can be as low as 2%. Therefore, insurers need to increase their efficiency, and there are significant opportunities for them to do so, as many of their processes are often manual or reliant on complex spreadsheets with little or no control.
By automating these processes through digital, insurers can increase their margins and improve efficiency, ultimately reducing the cost of service and support while improving speed of response and customer satisfaction. According to a recent survey by Accenture, 35 percent of insurers reported more than 15 percent in cost savings from automating systems and processes over the past two years. Consider how you can streamline complex internal workflows in a way that enables future flexibility in case of claims calculation or regulation change.
Digital competitors and traditional insurers alike are focusing on improving interaction across these areas. And those who succeed in quickly bringing new apps, experiences and efficiencies to market will see a host of benefits, including increased premium volumes, improved customer loyalty, improved margins, reduced costs and extended distribution channels.
Many insurers have already started. Find out how they’re progressing their digitization efforts, so that you can focus on building the right apps that transform your group into a digital insurer.