Insurers need to find new ways to build capabilities to meet the digital needs of their customers as big technology companies and non-traditional players enter the insurance market, according to the recently released World InsurTech Report 2020 (WITR) from consulting firm Capgemini and Efma, a global non-profit organization that facilitates networking between decision-makers at insurance firms and banks.
The coronavirus pandemic has accelerated insurance digitalization in order to meet customer demand, the report says, and adopting a new mindset, leveraging intelligent processes, and collaborating with ecosystem partners will be crucial for insurers to meet rising business and customer needs.
The pandemic has increased customer engagement and expectations, the report notes, and presents a growing opportunity for insurance technology providers as insurers focus on their digitalization efforts.
Boundaries between insurance firms, insurance technology companies, and big technology providers are blurring, and insurers need to improve on high-impact focus areas including customer centricity, intelligent processes, product agility, and an open ecosystem to remain competitive.
The report, which covers insurance segments including life, non-life, and health insurance, is based on a survey of more than 175 insurance executives worldwide and interviews with traditional insurance firms and insurance technology companies.
The worldwide health crisis has affected sub-sectors of the insurance market in different ways. For example, life and health experienced a hike in claims, while travel and auto saw a decline. But all insurance providers have seen changes in how their customers engaged with them, the report says.
Even with more than 90% of firms now fully able to conduct business remotely, they felt the pandemic’s impact on their new customer acquisition and retention.
But the pandemic itself isn’t the only threat to customer acquisition and retention, the report notes. Big technology providers have raised the bar for customer experience and trust during the pandemic, providing consumers with crisis-proofed processes, real-time responses, and intuitive customer care, it says.
“Customers want BigTech-like experiences,” says Kiran Boosam, vice president, Insurance Solutions and Innovation, at Capgemini. “As the global pandemic tests the businesses for resilience, BigTechs continued to set new standards” for customer experience.
Policyholders’ willingness to buy insurance from the technology companies has increased from 17 percent in 2016 to 36 percent in January 2020 to 44 percent in April 2020. To compete with these companies, insurers need to focus on critical priorities such as delivering superior customer experience (cited by 94 percent), crisis-proof processes (90 percent), offering real-time response (87 percent), being a caring partner (86 percent), and having insurance-as-a-utility (70 percent).
Much work needs to be done by insurers. Only 19 percent of those surveyed say they have touchless processes, 29 percent have human-centered design capabilities and digital-ready systems, 38 percent have implemented open application programming interfaces, and 48 percent have a cloud-native enterprise.
“A new mindset will be required for firms to shift from capability and asset ownership to shared access to foster efficiency and encourage partnerships with specialists,” the report says. “It will also enable firms to focus on their core competencies and deliver better value through hyper-personalization and continuous co-innovation.”
The findings show that consumer trust is taking a hit and the value of insurance is being questioned in certain product segments, Boosam says. It’s noteworthy that few insurers have implemented process digitization and touchless operations, he says. “These are the backbone for responding to the customer in real-time and scaling up operations without many constraints on staff,” he says.
