How Digital is Disrupting Insurance
Digital technology and tools have already revolutionized the way most consumers buy home and life insurance. Consumers now have on-demand access to endless information, customized products at lower prices and require less agent interaction than ever before. Insurance carriers and brokers who’ve taken advantage of e-commerce and digital media, such as GEICO and State Farm, are gaining market share while smaller, agent-reliant players are experiencing steady declines. This is digital disruption.
While change to the marketplace is apparent – life, health and commercial insurers have been slow to react to how digital technology has already disrupted their businesses. Apart from remaining competitive, they’re missing out on the opportunity to use digital as a tool to accelerate growth, build competitive advantage and be a leader in the modernization of the industry. This opportunity won’t last. The reality is that insurance is highly regulated, linked to loads of personal consumer data and expected to be highly personalized based on unique risks. Most importantly, the industry is far too dependent on data-driven insights to believe that digital will not triumph over human based underwriting, selling and service models. The question isn’t whether to go digital; but instead what digital initiatives to take on first.
Digital Transformation in Insurance
Success and failure in digital transformation of the insurance ecosystem will depend on three main considerations:
- Whose side are you on? [Hint: It should be the end customer.] A digitally-driven business uses digital technologies to assist brokers, advisors and agents in helping their clients and/or the end-consumer. Going direct to your customers with information, guidance, expertise and even direct selling will contribute to long-term success. What won’t work is reliance on intermediaries to drive this interaction – their business interests will be primary in their exchange with the consumer. Insurers, and all of their constituents, have to make it clear to the people in their own organization that they don’t rule the roost anymore – the end-customer does.
- What do you know better than anyone else? [Again: It better be the customer.] It is no longer acceptable to have a product-based legacy database; moreover, systems which can provide product pricing and margin information in extensive detail, but cannot indicate which customers buy more from you and/or are the most profitable. There are many viable ways to solve this problem and excuses don’t cut it anymore. That’s just table stakes. The action will soon turn to the use of analytics and predictive modeling to aide the end-customer in risk mitigation.
- Can you make money by making the world safer? The world seems to be getting more dangerous by the day. We rely on insurance to transfer risk for many of the maladies and predicaments that occur in our day-to-day. In a world where people live to be 100, where car accidents cease to exist, and retirement lasts for 40 years, will life insurance companies remain important? If these companies can shift from using information to make protection affordable to using information to mitigate the need for protection they sure can.
It all boils down to one simple idea: transform now and reap the competitive advantage. Wait too much longer and you’re relegated to the list of industries that no longer exist.