David Catterall, Head of Digital at Co-operative Insurance shares his thoughts on the digital disruption insurers are facing. With 15 years’ experience of delivering business growth through digital channels, David is a digital evangelist with a strong focus on delivering value-add customer and business propositions. With the exceptional pace of consumer and technological change, David reveals why it’s different this time…
If organisations are not changing and constantly innovating they will become irrelevant. Relentless innovation is required to break the commoditisation cycle because digital disruption is here and it’s coming to the insurance industry.
Digital in insurance should be seen as something that can positively impact on the overall customer experience. It can be an enabler if applied in the correct way, providing competitive
advantage and delivering superior customer service. If insurers embrace this opportunity they will inevitably improve customer loyalty and start to see more positive engagement and ultimately customer advocacy.
Digital insurance needs to encompass the development of new products and services created with specific customer requirements in mind. So how do insurers abstract digital technologies to create new unserved customer needs? How can the industry move away
from being insurance providers to risk mitigators who provide a value-add service? Supporting customers through stressful events like burglary, a house fire or a car
The opportunities are endless, for example the potential of digital can also include products
and services outside of customer requirements. As Steve Jobs said ‘A lot of the time people don’t know what they want until you show it to them’. He created the Apple smart phone first and the demand for them followed.
Insurers need to engage with customers at the right time (location-based services), with the right product and/or service. For example using location-based services to alert customers undertaking high risk activities such as parking their car in crime black spots. This adds real value and enables customers to avoid risk in the first place.
So how do you innovate in insurance? How can insurers attract people from other industries to work in insurance? Working in the insurance industry and trying to drive innovation and cultural change is a difficult thing to do. It’s a tough nut to crack; traditionally insurance organisations are about managing risk through the use of data so therefore the people that work in the industry are by nature risk-adverse. It’s not known as an exciting or dynamic industry so when it comes to talent and innovators how can insurers compete with
organisations like Google, Amazon or Apple? When it comes to product innovation and digital disruption, insurers are reluctant to evolve.
In digitally mature organisations like Google and Apple there is a ‘fail fast’ culture. If an idea fails to gain traction, they kill quick and start again. This is accepted as a cost of innovation e.g. think Google glasses. It is something the industry needs to work on but with Telematics, the Internet of Things, big data and location-based services, there are lots of new exciting digital influences that have the potential to attract new talent and transform the industry.
Taking a step back and thinking about insurance at its core, it’s about collating and analysing data from various sources to identify a customer’s risk and pricing that risk. Data analytics is the foundation of competitive insurance. Currently insurers can’t compete with the analytical capabilities of new digital powerhouses like Amazon with recommendations or Google Public Data Explorer. These organisations are at the forefront of digital disruption that is systematically destroying existing business models and creating new, better models. Other examples of digital advancement are Uber with personal transport and Airbnb with accommodation.
With digital disruption, innovation in the marketplace and the capabilities of other service industries, insurers are stuck in a bubble, historically protected through a heavily regulated environment. This has suppressed modernisation and innovation with insurers using this as an excuse to maintain the status quo. There are already other organisations out there that are currently looking at digital disruption as an opportunity to enter new markets. It won’t be long before they enter the insurance market and there will be a point when someone says, ‘there is a better way of delivering insurance services’ and, they will change the whole face of insurance. (Personally I don’t think that it will be an insurer.)
Moving forward there will be a shift of power through the use of data, the amount of data
available and critically its innovative application in solving customer problems. Knowledge is power and although questions around data ownership have the potential to be a game changer there will be a power shift. Power will shift from businesses to the consumer and that business models will switch from customer relationship management to vendor relationship management. Consumers will pick and choose who has access to their data and who can provide them with personalised products and services based on this data. This is just my view of one future outcome, however, the reality is organisations need to embrace digital and be continuously changing and innovating in order for their propositions to remain relevant.
It is difficult balancing short-term profitability and long-term investment but as the full impact of digital is felt there will be a realisation that amid this wrenching change the industry will forever be upended and insurers will either transform or die.
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