Remaining competitive in the face of disruption in insurance
Advancements in technologies have disrupted every industry - insurance is no different. In fact, what lies ahead has never been so critical. 70% of insurance CEO’s say that the next 3 years will be more critical to the industry than the past 50 years. 4 out of 5 believe they might not stay competitive when it comes to new technologies.
As traditional insurers face the risk of losing 35% of economic profit in the next 5-years due to distribution, production and regulatory threats. Insurers are now not only faced with the challenge to improve their current value chain but must also extend it.
Despite all this doom and gloom, there is light at the end of the tunnel. By digitizing their existing business, insurers are able to drive out significant cost across the value chain. In fact, there is an $880m opportunity in operational costs savings across sales & marketing, servicing & claims, operations & support from digitisation in personal lines insurance alone. The majority of this saving will come from transformation in digital claims and process automation and the industry’s digital maturity is progressing, up 3 points from 2017 and well above the global average across industries.
But with all this change there will be clear winners and losers. Some are predicting that large incumbents could more than double profits in the next 5 years by digitizing their existing business. If delivered right, digital technologies have the potential to deliver the triple prize: satisfied customers, lower costs and higher growth.
The future insurer
As insurers continue to feel the heat from increased competition, more demand for tightened regulation and shrinking profits, better customer experience (CX) could be the difference between success and failure. Insurers that leverage technology to respond to changes in customer behaviour and deliver better digital services will remain competitive. But to get there, today's insurers will need to build new operating models to compete against traditional and non-traditional competitors.
The high-performers will be the ones that deliver on customer demands in an efficient and effective manner. High-performing digital insurers of the future will require:
- Digital products & services with dynamic pricing and value-added services
- Analytics to deliver personalised experiences to customers
- Omni-channel experiences to increase sales and retention with a diverse channel mix
- Automated operations to reduce response time to customers.
If you dig deeper into these traits, real success requires a remodel of both front-end (what is delivered to customers) and back-end (how it is delivered to customers) operations. Far too often, investment remains on the quick-turnaround, tangible front-end customer facing attributes such as creating a new digital product or developing a new channel of engagement. But real value will only come once back-end process for those new digital products or channels are automated and respond in a simple and timely manner.
Looking at the example of claims processing, we can see that processing claims through offline (in-person/phone) and online (portals or mobile apps) channels has become the norm these days. But there is still further we can go. Having automated processes that use data and analytics for claims management, assessment and settlement will reduce turnaround time and improve accuracy and in its true sense, transform CX. Insurance companies that have made the switch have seen considerable improvements such as a 20% increase in customer satisfaction, 25-30% reduction in claim expenses, improved claims accuracy along with the added advantage of increased employee satisfaction.
Even though both are equally important, one can’t deliver the ROI without the other. Forrester recently observed that CX has stalled as organisations have focused mostly on front facing technologies and the backend infrastructure has not kept pace. As a result, insurers in Australia are offering mediocre CX and are failing to differentiate with CX.
In order to deliver enhanced digital experiences, digitizing an end-to-end customer journey that incorporates front and back-end operations will be vital. Insurers looking to survive and thrive in this era will need to move from offering average CX to highly personalised, seamless and efficient CX.