Last week, I talked about the results of our latest Technology Vision survey and its indication that “Every business is a digital business.” Big companies are jumping into the digital race, using their extensive resources and capital to redefine their own industries and create new markets. While digital is important for all industries, it is imperative for insurance.
The insurance imperative
The insurance industry is already experiencing the ramifications of digital advancements. Customers are placing more demands on insurers, expecting a level of personalized service and one-click convenience that challenges the traditional infrastructures of many insurance companies. Though most insurers have made inroads in areas such as online shopping—a single component of the customer’s experience—even that area lacks the level of personalization necessary to accurately and easily inform consumers’ decisions. As a result, many consumers make their purchasing decision on the one criterion they can grasp and compare quickly: price. Once price becomes the main decision factor, commoditization occurs and customer loyalty plummets.
CRR Progressive Commercial Business Insurance has calculated that up to $646 billion of existing premium income was at risk of switching in 2013 alone. Personalized service is a critical factor in switching decisions for many life and P&C customers.
Switching is not the only, or perhaps even the most threatening, factor affecting insurance. More at risk is the industry’s unrivalled expertise in collecting, handling and applying data to make critical decisions in record time. As digital advancements occur, economical and technical boundaries to acquiring and using data are lowered, enticing new types of competitors into the market. These competitors will not only come from a new breed of insurance companies that are willing to meet emerging market needs, but possibly from information superpowers skilled at both fast data application and in delivering rapid, individualized customer service across digital channels.
An enviable position
Though these threats are real, insurance companies are in an enviable position for benefitting from the new digital world. Their inherent expertise in handling mass amounts of data and in advising customers can be applied to creating a powerful digital business. Eliminating data silos and establishing a data supply chain are critical steps in this journey. This supply chain begins when new data is entered or combined and delivers timely, informed insight rather than a product. The goal is for any business user from executives to those handling the front lines to ask any business question and immediately get a data-driven answer from the masked data supply chain. Recipients should not be limited to just your internal organization, but information should flow to those in other channels such as agents, brokers or, when appropriate, customers.
Along with information flow, successful digital insurers will provide access to user-friendly tools and apps that enable quick and accurate decision making. These apps can move decision points closer to the edge where daily decisions are communicated and executed. As a result, knowledge workers can make business choices more quickly without sifting through complex data. Workers on the front lines, such as customer service representatives or those handling the first notice of loss, can be guided to the right choice or offerings based on the factors of each situation. Thus, the entire organization becomes more empowered to act quickly and accurately on increasing volumes of information.
Armed with a well-functioning data supply chain and user-friendly access to timely insights, digital insurers can take advantage of these capabilities to:
- Gain a superior ability to manage risk.
- Provide the customized products and personalized services that customers demand.
- Seize or create new market opportunities specifically suited to their risk appetite and expertise.
- Monetize their advanced data handling capabilities and insight to provide knowledge services to other industries.
Join me next week, when I will take a closer look at how becoming a digital superpower can compete more effectively by becoming truly customer-centric.