What are the Digital transformation trends in the insurance industry? What are the opportunities to be seized and the gaps to be filled? What do customers expect? That’s what we’ll cover in this post.
Digital transformation in the insurance industry is not new. It has already revolutionized a variety of industry processes and dynamics, and it proceeds at an unstoppable pace. And yet, there are still many delays to overcome, many opportunities to seize.
The time to fill these gaps is now. This is all the more important in the wake of the current health and economic emergency unleashed by the Covid-19 pandemic, which has made digital even more precious and indispensable. This is a question of health, which, today, adds up to the three pillars that have always supported digitization: cost reduction, increased productivity, and greater customer satisfaction. These are three elements that reinforce one another in a way that can support strong growth; the world of insurance is no exception.
In this post, we will start by analyzing one of the main driving forces behind Digital Disruption, namely the expectations of customers. Then, we’ll take a look at the most important digitization trends in the insurance industry.
What customers want
Digital transformation has changed the world we live in, on all levels. And, it has revolutionized the processes and dynamics of all production sectors, moving the center of the business more and more towards the customer.
Just think of today’s digital giants, such as Amazon, for example, with its very high attention to the customer, their preferences, behaviors and needs, both in the marketing and customer service phases (phases that are increasingly interconnected). Or, think about companies in the tourism industry such as Booking and Airbnb, where feedback and personalized proposals are essential. Or, think of the world of banking, with its increasingly user-friendly and customer-oriented apps (to learn more about the dynamics and trends of digitalization in this sector, see here) or the utilities sector (on which we have focused in this whitepaper).
The examples are endless. However, there is once certainty, especially for companies in the insurance industry: the push towards digital transformation and personalization.
Today, this is exactly what insurance customers expect. They want simplicity and clarity. They want relevant information about products and services to be easily accessible, especially information about costs. And, they want everything in just a few clicks. Today’s customers expect fast and efficient customer service, available 24/7 and in omnichannel mode, especially on a mobile device.
Offering all of this to their customers also offers advantages to the insurance companies themselves. First and foremost, it boosts Customer Satisfaction; in turn, this is reflected in the increased retention and loyalty of its customers. These are the primary objectives to aim for in such a competitive market. So: putting the best digital experience on track increases loyalty and the possibility of up-selling and cross-selling. This also makes companies more attractive to customers.
That’s not all: Digital Disruption in the insurance industry also translates into a significant reduction in costs. For complaints, for example, we are talking about a cost reduction of around 30%, which can only be achieved through better process automation (see here).
Digital also delivers a major asset to insurance companies: a huge amount of data related to its customers. We will start from this point of view in this second part of this post, where we will focus on the 5 main trends for the future of the Insurance Industry.
The 5 trends of the future of digital transformation in the insurance industry
Below are the 5 most important trends for the digital transformation in the insurance industry. It’s important to stress that this is not a remote, distant future, but a near future, where the trends are already in action. Companies who are able to take advantage of them now will be better positioned for the future.
1. Big Data, IoT, Machine Learning
These themes are now mainstream in the business world and they center around one key asset for the digital world: Data.
Data on customers and processes allow companies to monitor and optimize processes. At the same time, they allow companies to really get to know their audience, its characteristics, its behaviors, its needs, and how all this varies in the short or long term.
The key is knowing how to collect, analyze, and interpret the data. To do this, humans are no longer sufficient, especially when we are talking about the very large audiences typical of insurance companies. Instead, what is needed are technologies like Artificial Intelligence and Machine Learning systems capable of processing an enormous amount of constantly updated information. Such information also comes to us from “objects” that are increasingly connected; this is the revolution, still to be explored, of IoT, the “internet of things.”
Some examples of IoT that are used in the Insurance Industry are wearable devices or automobile components, which will certainly change the dynamics of car insurance policies. And it also includes anything related to the home and factory world.
It is easy to understand how big the margins are in this direction. Having all of this data at your disposal, which is increasingly precise and “deep”, allows companies to develop products and services that are truly tailored to their customers. Today, just the basic personal data is just the tip of the iceberg of what can be collected and available to companies.
Once again, there are benefits of having such data on customers can be a win for both the company and the policyholder. So what is the real objective of the analysis and collection of Big Data? To achieve a truly personalized Customer Experience.
2. Personalization: the case of AXA-MPS and Doxee
We’ve seen it above: the real goal of Big Data analysis is to learn how to address individuals, in one-to-one mode. All of this, in turn, translates into more and more strategic marketing and Customer Service that is more efficient and close to customers than ever before, even when we are talking about a huge audience of customers.
In this regard, let’s look at the case study of the joint venture between the French insurance giant, AXA and Montepaschi. These major insurance players have chosen the services of Doxee to create personalized and interactive videos that were sent to its customers via email, with the goal of reducing the churn rate.
The results speak for themselves:
- 40,000 personalized videos sent annually
- 91% viewed the entire video
- 10% clicked on the embedded call-to-action (also personalized)
The secret of this success? The oldest in the world: address every single person in a differentiated way, based on their characteristics. In this case, it was also about digital data collection and a targeted storytelling strategy.
To learn more about this case study, see here.
3. Cloud and aaS mode
Fluidity, elasticity, and scalability are three key themes in the digital world and the Insurance Industry.
Today, insurance coverage is very diverse and must be able to address a variety of coverage scenarios, from long-term to short-term and everything in between. Think travel, leisure, or business insurance. Coverage for sports events, for health needs; everything related to the world of the sharing economy.
The future, therefore, will be increasingly focused on usage-based policies, which can be activated in a simple way, preferably through dedicated apps.
For insurance, all of this is reflected in greater attention to the “as a service” (aaS) side, which in turn can only be supported by an efficient IT architecture based on Cloud Computing systems, which are elastic, fluid, and scalable by their very nature.
4. Gamification
Gamification is a marketing strategy that is proving to be increasingly successful, especially in terms of its impact on the Customer Experience and customer engagement.
For example, Vittoria Assicurazioni created the “Vittoriadi,” a digital data game that aimed to build customer loyalty. The results? Fifty-seven percent more customers signed up to the company’s loyalty program, annually (source newinsurance.it).
5. Blockchain
In a nutshell, Blockchain is a distributed register of transactions that does not require a central validation body. It’s a technology that has taken the limelight with the creation of the first cryptocurrencies, from Bitcoin onwards. It’s also a technology that offers promising potential for many sectors, especially for insurance.
There are many start-ups in the industry focused specifically on this area. And Insurance Industry giants are paying attention, as evidenced by some targeted acquisitions.
Lloyd’s of London, for example, recently acquired BellMead Tech, a start-up focused on claims management through blockchain. (See here for more details).
Digital Disruption in the insurance industry is moving at an increasingly accelerated pace. The companies who will win the challenges of the future will be those capable of running faster, in the right direction!
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