Insurers are operating in a tough environment as they face economic pressures, high levels of competition, rising costs and ever increasing customer demands. A further challenge, and conversely the solution to ensuring that they survive and prevail, is the need to become more digital.
Digital has had an impact on everyone, regardless of age, location or organisation, changing the way we do everything from shopping, education and managing our money to communication and entertainment. It is disruptive by nature, with lower barriers to entry for most businesses intensifying the threat of competition from new entrants.
This impact means that nothing we knew 15 years ago can be taken for granted. Yet the insurance industry is way behind the digital pace and failing to adapt to the changing conditions.
So what exactly does it mean to be digital? While the term is ill-defined, Celent has described digital transactions as “the strategy consisting of transferring as many manual tasks as possible into digital activities”. Although some insurers are happy to achieve basic digital capabilities, others are more ambitious. These insurers have started to shape their extreme digital strategy and are creating new digital value propositions.
This raises another consideration that insurers need to take into account. Where are they already in the digital process and, perhaps more importantly, where do they want to get to? While not every organisation will want to become an extreme digital insurer, doing nothing about digital is simply not an option.
Historically, when there has been a gap in the market where customer demands are not being met by the incumbent insurers, other parties have stepped in to fill the space.
Until now these challenges have come from the likes of aggregators and claims management companies, but the market is opening up to new types of competitors. Although there is no Google or Amazon of general insurance yet, Amazon already acts as a guarantor for purchases from third-party retailer sites by enabling customers to pay using their Amazon log-in. How long, therefore, will it be before these players or others from their peer group enter insurance?
While becoming digital is a radical step change that is quite disruptive to the traditional business model, it also brings with it a wealth of opportunities. In addition to being able to offer customers the optimised experience they require, insurers can also take advantage of streamlined and simplified processes, improved risk analysis leading to personalised pricing, and the ability to offer new types of cover for the digital age. For example, how is a customer’s iTunes collection or cloud account insured?
Once insurers understand what being digital means for them and the benefits in terms of increased revenue, decreased costs and customer engagement, they can start putting a strategy in place. This needs to support their top business priorities while addressing both the opportunities and risks presented by digital.
SSP is well placed to fast track insurers’ plans by helping them build their digital roadmap and offering a powerful platform that addresses all the major areas of capability through SSP or digital partner assets.
About the Author
Neil Thomson is the Global Head of Insurer Propositions at SSP. He has a solid understanding of the current challenges faced by insurers across both personal and commercial lines, as well as deep insight into the trends and future capabilities required for next generation insurance.More Content by Neil Thomson