The current business models in insurance are under pressure. Both customer and community expectations of the sector have changed, modern technology has provided new opportunities, and regulatory requirements and costs of compliance and non-compliance are increasing. Expectations of accessibility, security, sustainability, ethics and morals pave the way for numerous new business opportunities - opportunities to secure future profits.
Customers' expectations of how they interact with businesses are currently undergoing the most fundamental change since the dawn of the internet. Today, customers expect to be at the centre and receive a personalised service, where they are guided seamlessly through the interaction. Creating this kind of customer experience requires a high degree of integration between all the companies involved. This is a "Customer 4.0 world" where it is no longer a question of whether to respond to the new requirements but when to respond.
1. Become part of the customer universe
The most successful companies are the ones who best understand their customers. So when many customers today see their insurance journey as impersonal, time-consuming, transaction-heavy, complex and expensive, there is a need to change course and take action to become part of the customer’s universe. Equally, for insurers to remain relevant, the way in which customer insight is created and used must change, and the use of modern technology is crucial to achieving this.
In the new customer journey, modern technology will also play an important role in supporting traditional insurance offerings by developing a platform of services that can be tailored to each user to meet a wide range of needs. This means transforming customers' ways of interacting to create new products and services that are supported by partners across customers' current and future ecosystems.
The digital customer journey of the future for insurance products must be simple, easy to use and accessible, offer dynamic deals and policies, and claims must be generated and paid promptly.
2. New platforms and technologies create new value chains
Both in Denmark and the rest of the world, a number of startups have begun to challenge the traditional insurance industry by rethinking the individual elements of the insurance companies' value chain. At home, a company like UNDO, which has partnered with TRYG insurance, is a clear example of how an insurtech company is challenging established players. UNDO has now secured its first 10,000 customers.
Voom is another example worth examining. Over the last few years, many major cities have seen more electric vehicles - a change that places new demands on insurance. Voom is an Israeli insurance platform focused on specialised vehicles that can be used on land, water or in the air. Voom’s CEO Tomer Kashi says: “In all of the niche markets that make billions of dollars in insurance, current insurance policies cannot keep up, since insurers do not differentiate between customers' individual risk profiles. This is equivalent to paying a fixed price per shopping basket in the supermarket, no matter how many products are in the basket. ”
Modern technologies, including AI, ML, big data and cloud computing can help develop advanced pricing algorithms, and give insurers the opportunity to better understand where the risks lie, enabling them to create more advanced pricing models and analyse the massive amount of data generated across a variety of sources. Advanced machine-driven platforms allow for optimised and dynamic offers, better damage management and more accurate pricing for most customers. At the same time, additional efficiencies can be made through automation of more manual roles, more tailor-made offerings and reduction in overall operating costs.
3. Cyber strategy and compliance is a hygiene factor
Digital information has become core to many companies and a prerequisite for efficient service to their customers. At the same time, it is important that all personal data is properly managed, and it is not only a breach of legal and sectoral requirements when customer data is compromised - it is a serious breach of customer trust. Yet, we are seeing an increasing amount of digital information being compromised through cyber-attacks, and big brands continue to lose sensitive data and become victims of cybercriminals. The UK government estimates that 80 % of all cyber attacks can be avoided by following their recommendations for establishing "cyber hygiene".
However, approaches to cyber hygiene are still quite immature, and despite the increased incidence of cybercrime, many companies still do not have cyber insurance. This creates great business potential for insurers to help companies get their cyber-hygiene in place - but they must understand the risks of getting it priced properly. The right cyber insurance policy should enable the company to get back on track if they are attacked.
4. Strategic partnerships provide new opportunities
Companies are increasingly using partnerships to add insurance to their existing services. British Airways' official insurance partner is Allianz, which offers insurance as "something extra" that effectively embeds their offerings into the service. At the same time, many of the large insurance companies have established new "bank alliances".
While insurance companies are investing in technology and offering digital services, they are still light years behind Amazon, which, in 2017, launched "Amazon Protect Insurance" and therefore no longer had to worry about managing a lack of confidence in insurers after, for example, the PPI scandal.
The future will bring a different type of relationship between the industry and customers. A relationship based on trust, simplicity and a unique customer experience.
PA is part of Insurance Conference 2020
We’re proud to be part of the annual Insurance Conference in 2020. The conference brings together all those responsible for insurance activity to discuss the latest trends and developments. This year, Susanne Gildberg, PA financial services expert, will moderate the discussions between the attendees.