The insurance world is undergoing a sea change – not just within individual sub-sectors, but across the industry as a whole. This is colliding with digital transformation in general.
It’s not just being disrupted by the move towards online or mobile collaboration: there are other forces at play. While the creation of new digital products and digital innovation poses a huge opportunity for insurance companies – it’s also highly risky. It is asking for a huge leap for some companies that follow the oldest of business models.
New technology means new considerations must be taken into account. For example, telematics systems in cars detect users’ driving style, distance and time of day, feeding that data back to insurers to determine policy rates. Typically, telematics has been seen as associated with the motor industry and its black boxes, but is increasingly being used in home and health insurance as more consumers are happy to use behavioural trackers in order to bring down the cost of their insurance. Wearable fitness trackers and health monitoring apps all disrupt the way insurers’ price and underwrite coverage.
The Internet of Things is having a huge impact on the insurance industry as well. It creates opportunities for further engagement with consumers and their cars, homes and selves. The IoT will also pull in competition from non-insurance players within the market, such as automotive, technology and mobile.
This is a huge challenge for the insurance industry in the UK. It is one of the least digitally transformed business sectors, unlike banking, telecommunications, media and retail. This is putting insurance companies in a position where they have a huge leap to make to meet customer expectations, and that chasm is growing everyday.
The customer experience has to be at the heart of an insurance provider’s digital transformation journey. This is a tough challenge in an industry that’s largely intermediated. Customers are in the driver’s seat of all interactions with brands so insurers need to create positive customer experiences at multiple touch points. Insurers in the UK have never really been seen as “brands” in the same way that retailers, or even banks are. In this new digital world, they need to start thinking more about what the customer wants and that personal touch – which they’ve never offered before. One way in which insurers are approaching this already is by creating a sub-brand, for example Prudential’s Vitality health insurance brand. This has allowed it to build a new platform on which to start reaching out to new customers.
Many insurance players as we know them today will cease to exist in the next decade, or will no longer be considered relevant. There is an existential threat for the insurance industry – but it's the same threat being faced by companies across the board – digitise or die. One reason for this is that in certain instances, the objects/things they insure will cease to exist. You only need to look at the sharing economy to see how consumer behaviour is changing. People won’t own cars anymore because companies like Uber and Google will be monopolising the market with driverless cars and affordable door-to-door public transport. So where does that leave motor insurance – will the Googles and Ubers of the world own the insurance? In some cases, this is already happening, with Google’s Compare tool, which can be used to compare car insurance quotes, and Uber’s bundled insurance and car leasing arrangements for drivers.
The key point here is that for these insurers, there’s an absolute need to change. Some will certainly react faster, and some are already starting to adapt, but others will fail. It’s a classic case of sink or swim.
For those that can swim, the struggles don’t just stop there. Those brands that do survive need to adapt totally to operate as a modern brand, a totally alien concept to the majority of insurers.
Edo Tealdi, Managing Director, Digital, NTT DATA
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