Why insurers need to embrace technology to stay ahead of the race
There is a constant wave of new technology disrupting financial services and the insurance sector is no different
With new entrants and data analytics tools changing the industry landscape at a pace not seen before. This can mean, however, that legacy systems become a burden.
The problem of legacy systems acting as a dead weight on insurers is not new. In a survey published by EY in 2013, firms acknowledged their low levels of digital maturity and the need to take action. Despite this, little has changed and the industry continues to be over reliant on paperwork, workarounds and aging technology. This can leave firms threatened by new entrants with a clean sheet and who are unburdened by outdated technology.
CSFI and PwC recently announced the findings of a survey that analyses risks within the insurance industry. It showed that firms’ concerns about their ability to manage structural and technological change have risen sharply, jumping from #15 in the ranking in 2013 to #6 in 2015.
There are a number of ways that this is affecting the direction of the insurance industry.
For one, the insurance sector is attracting the attention of big brands from outside of the industry that have spotted an opportunity to challenge established players. Often these ‘disruptors’ are nimble and unhindered by legacy technologies, so are well placed to service the needs of increasingly digital-savvy customers.
For example, internet giant Google recently entered the insurance market with the launch of its “Google Compare” tool. It provides price comparison for auto and travel insurance quotes, as well as mortgage quotes in the UK. This is already being viewed as a real competitive threat by some of the most established industry players.
The growth of these online aggregators, allowing customers to compare prices and purchase insurance, is just one example of a trend that is threatening established insurers’ customer loyalty.
Another trend is that the ubiquitous smart phone and the development of faster mobile and wi-fi networks are putting computing power and easy-to-use apps in the hands of customers. Prospective customers therefore find it easier than ever to do their own research, find the policy that suits them and secure the best price.
Many leading industry players, weighed down by existing infrastructure and faced with competition from smaller entrants and disruptive players from outside the industry, are looking to embrace inventive ideas and work with innovative partners, to keep pace with the emergence of new technology.
Customers now expect to interact with organisations in a variety of ways, using whichever technologies are most convenient, whether it be on the phone, the internet or by mobile. Insurers must be able to accommodate this and allow their customers a choice of contact channels. According to customer experience futurologist, Dr Nicola Millard, “easy is the new loyalty”. Make it difficult and customers will go elsewhere.
This is further complicated by the challenge of dealing with enquiries from customers in varied states of mind and at various points along their insurance buying process. From individuals methodically poring over insurance quotes to distressed people reporting car accidents or domestic disasters, it’s vital that contact channels are effective, simple and seamless. For example, today’s customer may start their contact with an insurer researching quotes or policy details online, switch to webchat and then pick up the phone. At each step, the handover from one contact channel to the other should be seamless, avoiding the need for a customer to repeat the same information time after time, which can be hugely frustrating.
Insurers are looking to these trends to personalise their communications, reach their clients and better explain products and services. Indeed many large and established insurers have started using digital channels and process automation to deliver a more personalised service and regain control of client relationships.
But according to a global report, most organisations — in insurance and elsewhere — have not risen sufficiently to the challenge. The research found that some 85 per cent of people believe that it should be easier still to contact the organisations they do business with.
So, what next?
Consumers are increasingly embracing technologies such as video in their day-to-day lives. As a result, new solutions such as personalised video are quickly gaining ground. These allow companies to create and send highly personalised, easy to understand, and engaging video messages to individual customers. This type of technology can give insurers a competitive edge, helping them to grow and retain their customer base and give customers a better experience.
Insurance companies are re-evaluating their preparedness to compete in the changing marketplace from an internal standpoint, too. Global insurers have, by definition, geographically spread and often demographically diverse workforces. Putting in place a single stable cloud-based network is therefore critical. It creates a foundation for seamless collaboration between employees and with customers. It also helps them to quickly and easily access an increasing number of business applications and services wherever they are hosted.
Using solutions that allow for consistent data and account management processes also helps insurers to minimise key risks such as mis-selling.
Over the next few years, the uptake and use of the best technology will play a significant role in differentiating insurers. As incumbents with years of experience, insurers should have the edge over new entrants, with an unrivalled depth of knowledge and understanding of their customers. By upping their game and adopting smart technology, they can remain in pole position. Ultimately technology can help them be the long-term winners.