Worldwide, insurers are adopting the digital insurance business model. The initiatives range from mobile apps that let agents and brokers explain different scenarios to customers, to brand building on social networks, to telematics in vehicles to allow better pricing of driver risk. The insurers are realizing that digital offers an opportunity to benefit from new streams of revenue growth and to reduce costs.
After having transformed sector after sector, from retail to healthcare, digital has come to insurance. However, only a few forward thinking insurers have embraced it yet and there still is a huge opportunity for the others to avail of. Those who have gone down the digital path have gained tech savvy customers who seek lower-cost alternative models for insurance products.
The proliferation of social networks, omnipresent broadband and smart mobile devices have made digitization essential for all businesses, including insurance, and a disruptive digital transformation in insurance is now taking place. As a result, digital solutions for insurance companies are much in demand.
The following are a few ways in which insurers who are yet to become fully digital can gain on the competition:
Integrating the various channels such as banks, agents, brokers and online
Companies in insurance have been providing their products through banks, agents, brokers and online channels. Several insurers have also begun to provide bits of advice and information through digital channels. For example, many auto insurers offer mobile apps that let their customers access accident guides, pay bills, update claims and get quotes. Similarly, some insurers offer advice programs through social media sites like Twitter and provide prepopulated application forms and attractive offers through their websites to promote cross selling. But the service levels and pricing have not always been the same for each channel.
However, a few insurers have begun to integrate their channels in a compelling and coherent manner. They have digitized claims and gone paperless. They capture their customers’ information and make it available to all touchpoints for any product, thus creating a 360-degree customer view for marketing staff, claim adjusters, actuaries and call center representatives. They let customers submit claims through mobile apps, which let adjusters in the field to update the claims in real time.
The omni-channel approach lets them develop a deep understanding of their customers’ priorities. They are able to earn customer loyalty through genuine support and empathy for customers.
Equipping brokers and agents with digital tools
E-trade platforms comprise a fast growing class of tools that replace the labor intensive and paper based systems wherein a broker calls many underwriters to get quotes on a policy and then writes up each quote separately. The platforms also eliminate the need for brokers to navigate the IT systems of various insurers through different interfaces. Insurers bid digitally on the sales opportunities that brokers offer through e-trade, like in an auction, and the brokers don’t have to use different interfaces for the different participating insurers.
Collaborative networks is another class of tools that is promising. It digitizes insurance deal discussion, which is an essential part of the business. Wholesale brokers use collaborative software through which they can search for sales materials or industry news, widen their network and link to carriers whenever there is a new or renewal opportunity. The networks allow the brokers to communicate several times quicker than over the telephone or in person.
Embracing mobile to strengthen omni-channel approach
Another digital feature that strengthens an omni-channel approach is mobility. It provides benefits such as upgraded advice and sales support for agents and self-service abilities for customers.
For example, an insurer offers a travel insurance app that lets customers purchase insurance from anywhere in the world, get an accident guide if there is an accident, keep track of flights, etc. Similarly, life insurers provide mobile apps that let agents access the investment portfolio details of customers, in addition to payment history and fund performance. Some other insurers have mobile apps that engage customers more persuasively through videos and animation depicting common risks of routine life.
In another example, an insurer has set out to change the belief that an agent requires 5-6 meetings in person to close a deal. It has equipped its agents with tablets loaded with mobile apps to communicate with underwriters while they are in the field and to collect customer information. This helps reduce the turnaround time for issuing policies substantially. Opinion leaders among the agents, who can influence others, are targeted to promote mobile usage and uptake. This is in addition to an incentive plan, according to which agents who achieve their targets are provided reimbursement for the tablets’ cost.
Enabling customers through digital with self-service in claims management
Self-service in management of claims makes customers’ lives more convenient. For example, a healthcare insurer provides an app for scanning barcodes that lets customers instantly file medical bills that private healthcare providers issue and also to monitor the status of the bills.
Greater efficiencies are achieved through the digitization of suppliers such as automobile repair shops and medical clinics. Once the customers’ information is entered, it can be distributed to all players of relevance.
Using advanced customer analytics and capitalizing on big data for competitive advantage
Insurers can create competitive advantage and improve performance in underwriting when they use advanced customer analytics. Nearly all property and casualty insurers have the basic analytical capabilities, but the high performers adopt a more ambitious and extensive approach.
For example, a major commercial insurance provider reviewed its approach towards general liability risk for supermarkets using analytics software and found that there were good risks buried within certain broader segments. When it mined geographic data in detail, the insurer found that there was a sub-segment whose risk profile was more attractive. The sub-segment comprised grocery stores that had fresh farm produce as a significant proportion of sales. Each of these stores were located in the proximity of health clubs and round the clock parking. The insurance provider eliminated cross subsidies and targeted the stores with favorable pricing to improve its combined ratio significantly.
Insurers can use analytics to improve profitability and target potential customers likely to provide high profits, while avoiding adverse selection. They drive the worst risk to their competitors when they offer attractive pricing to high potential customers.
Some insurance providers have begun to study driving behavior using telematics in the vehicles and vary premiums on that basis. Digital devices in the vehicles alert the insurers about rash or negligent driving. Telematics provides information that lets insurers offer discounts to careful drivers and charge higher premiums from those who drive rashly.
Insurance carriers can also use digital data mining tools to keep track of mentions of their companies and products in postings on blogs and social networks. They can find relevant conversations and use them to analyze tones, locations or volumes. Some are mining such data to find high-value customers and to predict the customer churn likely to take place.
Employing service oriented architecture and middleware in main IT infrastructure to connect multiple touchpoints through digital
A new digital core system often calls for a massive investment and disruption. So, insurers can extend their existing systems through the installation of service oriented architecture and middleware, and then gradually switch to a new system.
Service oriented architecture outlines how programs interact so one program can work on behalf of another. Middleware is software that helps overcome legacy systems’ rigidity and acts as a link between applications and operating systems.
Effectively organizing the relationship between business units and IT for faster digitization
The time taken for the integration of new functionalities into legacy systems can be reduced through effective organization of the relationship between business units and IT. If the relationship is not managed carefully, the integration of new functionality into legacy systems can be a frustrating exercise.
For example, business units prefer IT staff to be more flexible and deliver functionality in phases, even when they work with pre-configured solutions.
A few insurers have taken the lead in adopting digital technologies in a big way and others are bound to follow as every business has to keep up with the digital preferences of the customers. Also, digital makes sense in terms of the cost efficiencies that it brings along with it.
Are there any other ways in which you think digital can or is making a difference in the insurance sector? Please share your experiences and opinions in the comments section below.