As we look back on 2020 – and aren’t we all glad to be doing that? – it’s safe to say that the rate of change in the insurance industry accelerated at least tenfold. Insurers experienced more change in the last 10 months than they had in the previous 10 years, with important shifts across the business. Many were long overdue and set the stage for a more disruptive future. That’s especially true relative to digital transformation – that is, the automation and optimization of core processes, agent interactions and customer experiences.
It’s also important to remember all the turbulence beyond the COVID-19 pandemic. Calls for greater racial and social equality will impact how insurers write coverage and go to market. Cyber threats continue to proliferate with little or no effective risk modeling or pricing. The massive savings and protection gaps will become increasingly severe as more citizens reach retirement age. In fact,
Then there’s climate change.
More profound change is on the way, and the industry must prepare itself with urgency similar to what it showed in the last year. The focus must be on transformation initiatives that connect and optimize all links in the value chain. Every traditional value chain component can be enhanced by stronger digital capabilities and advanced technologies, as highlighted below.
Insurers that get it right will enable the bold innovations (such as new insurance ecosystems) and unlock new sources of revenue (such as subscription models). They’ll also make it easier to do business through more effective and efficient underwriting and enhanced customer experiences. Perhaps most importantly, digital transformation will help insurers operate more transparently. Transparency makes it easier to manage the business and – more importantly – leads to trust, which wins customers. These principles can guide strategic and tactical decision-making in the years ahead.
- Product development:
EY research and analysis has found that the insurance industry has created only five new product classes during the last 30 years. Because of the pandemic, many insurers are reimagining product development around the emerging needs of customers. To design better solutions, they must be systematic about embedding customer insight into product innovation.
- Marketing: Even before purchasing, consumers want personalization.
According to recent research , 59% say tailored engagement based on past interactions is very important to win their business. We know that certain life milestones trigger insurance purchases. But most insurance companies are unable to predict or even identify when their customers might be ready to buy a home or start a business. And they aren’t known for engaging emotionally with, say, expecting parents. Smarter digital interactions and more effective predictive analytics are critical for insurers seeking such personal engagement. They will also help insurers strengthen consumer trust by balancing personalization with privacy concerns.
- Distribution and service: COVID-19’s acceleration of digital placement might be the pandemic’s biggest immediate-term impact on the industry as the shift away from face-to-face distribution gains momentum and self-service increasingly dominates customer interactions.
The EY organization predicts 75% of large commercial and reinsurance policies will be placed via a digital platform in traditional insurance marketplaces by 2030.According to Insurance Journal, an estimated 40% of current risks are tradable on digital platforms . This doesn’t mark the end of agents or brokers, though they’ll need to pivot to higher-value advisory services delivered via hybrid models. “Human-in-the-loop” interactions will provide access to the advice precisely when and how consumers need it. That’s especially important in life and health lines, as well as for financial well-being solutions.
The key is to deliver great experiences and personalized service at every touch point. Research shows that
- Underwriting: Better technology and richer data sets will enable underwriters to identify profitable risks more quickly and assess market demand for new products more accurately. Insights that take hours or minutes to generate today will be available in seconds tomorrow. Gone are the days when referral and pricing processes played out over weeks, by which time clients were often long gone. Automated data ingestion, third-party data streams, AI, and predictive analytics will help underwriters do their jobs better, faster and smarter than ever before.
- Claims: The claims experience has an outsize impact on client loyalty, longevity and likelihood to refer. Nobody wants claims to happen, but when they do, they are the moment of truth for customer relationships. The key is assessing claims accurately and paying them quickly. And this isn’t tech for tech’s sake;
companies with innovative underwriting and claims platforms show greater market share and stronger year-over-year results .
The insurance industry has long prided itself on its noble purpose – helping individuals, families, businesses and communities protect themselves against unprecedented risks. Has there ever been a time where that purpose has been more relevant to society than now? Have we ever lived in a world with more significant risk and constantly emerging threats? While the industry has responded well to the massive disruptions of 2020, it’s imperative that insurers seize the moment to engage more customers via richer digital experiences, higher-impact products and services, and more agile and dynamic operations and facilitate a safer and lower-risk environment for all.
