Sabine VanderLinden, global head of strategy and propositions of SSP for Insurers shares her secrets in shaping a digital business model.
In early 2013, Juergen Weiss, Gartner’s European Research VP for the insurance sector, recommended some research to help me shape SSP’s view of digital. The research helped me apply some concepts already being used within other industries. One of Juergen’s recommendations was The Digital Edge, a book written by Mark P. McDonald and Andy Roswell Jones from Gartner. Which is a good read for anyone wanting to build a foundation of understanding digital business models.
In today’s world, there appears to be two types of businesses:
There are analogue businesses led by executives who apply technology to take their existing business model online. Good examples are organisations that move their manual business processes from the bricks and mortar world to electronic channels in order to achieve automation and optimisation benefits. These businesses generally achieve more efficiency in their day-to-day operations.
Digitally-enabled businesses are at the other end of the spectrum. Run by new-world technology-savvy leaders, they are creating new sources of value, delivering tangible revenues and improving overall operational performance, through the use of digital technology. One key input is data. The information collected is then used to make better decisions. Good examples are organisations that use intelligent geo-locators in smart phones, sensor-based technology or context-aware applications that are able to determine what best suits consumer tastes and wants, as these can transform the way businesses segment, target, price, sell and communicate.
Some organisations have identified the role that technology must play in their business process and how they can deliver value from new architectural approaches but, to succeed, an organisation must combine two key elements:
• Digital transactions – the ability to drive omni-channel enhanced sales and services to expand the potential of front-office processing abilities.
• Digital experiences – the ability to create new types of customer propositions that increase customer satisfaction and advocacy, facilitate multi-party collaborations and generate additional premium income through the improved application of resources.
Today, a large number of businesses are creating digital transactions, but struggle when it comes to constructing a digital business supported by customer-centric engagements. With the ongoing
shift in behaviours and business models, market leaders are experiencing consistent performance challenges and must rethink how they approach their markets or face disappearing in the next decade.
What do insurers need to consider to become “digital”?
There are five existing business models:
1: Digital automation
Businesses that are handling volumes of micro-transactions efficiently through integrated and seamless processing. Digital resources are used to drive productivity, enhance operational scale and reduce overall costs. For example, PayPal has payment processes and Amazon has sales and servicing processes, both of which are automated online and are good examples of this business model. In insurance, many insurers are supported in the background by seamless and real-time underwriting and policy servicing. And have moved their new business acquisitions online.
2: Digital replacement
Businesses that replace physical resources with digital assets. Good examples are organisations that have introduced remote working, video conferencing or webinars to replace face-to-face interactions. In the car industry, examples include fuel replacement and the recent emergence of connected-car activities – imagine if the Google driverless car became the way everyone travelled around.
3: Digital enhancement
This third business model type enhances or raises physical asset efficiency and effectiveness by combining existing resources with digital ones. Good examples are organisations that combine omni-channel communications seamlessly to drive specific customer engagement outcomes.
4: Digital amplification
This model is the connector between businesses focused on digital transactions and those starting their journey towards digital experiences. This model delivers new customer dialogues and outcomes through the usage of digital resources. Many insurers have attempted to amplify their business with digital distribution and communication, but very few have looked at the same problem within their operational processes and the way they drive value in the marketplace.
5: Digital engagement
The last model brings targeted data sets into the way we interpret behavioural patterns and make business decisions. This model transforms traditional value propositions and supporting operations. By applying key insights gained from information and utilising digital resources, businesses can drive profitable growth. Good examples are Google, Facebook, LinkedIn, and social network-based insurer, Friendsurance; they all use this model and fit in this category.
What will be your path to digitalising your insurance operation?
Where to start?
The areas that are already benefitting most from digital investments are marketing, sales, underwriting and pricing because they enable insurers to attract new quality policyholders. However, to drive long-term success from digital initiatives, insurers need to look at digital in its entirety across their whole operation, considering in particular how to deliver enhanced customer experiences, improved user personalisation and omni-channel servicing and communication.
Customer-centric digital insurers look at a very specific set of capabilities to set themselves apart from their competitors:
• Digital servicing – this will become a basic requirement within digital business models. Digital and mobile servicing and the usage of integrated contextual information will be the next phase of innovation.
• Seamless customer interactions – these will connect front and back-office processes into integrated engagements.
• Aligning internal and external constituents – these will contribute to the design and personalisation of products and services sometimes knowingly and other times unknowingly.
• Social media – this will be used to monitor and trigger more relevant communications with key stakeholders.
• Monetising value from insights – this will help insurers become more responsive to market changes and deliver more differentiated offerings and propositions.
The technologies required to deliver on the above capabilities include:
• User experience platforms
• Social media
• Advanced consumer analytics
• Next best action event triggering
• Customer dialogue management
• Mobile payment processing
• Business intelligence for enhanced customer visualisation.
The pressures created by market commoditisation, consumer empowerment, information transparency and increased consumerisation continue to disrupt many insurers, forcing them to change the way they do things. Advanced insurers are already shifting their business model and supporting processes by delivering targeted digital initiatives. Where does your organisation sit on the digital divide?
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