When was the last time your insurance company contacted you during the big events in your life (marriage, children, job, etc.), other than reminder calls when your premium was due? Hardly ever (at least in my case). The insurance industry is lagging behind when it comes to communicating with customers. Once you become their customer, it becomes a one-sided communication i.e. when you are in trouble you have to reach out to your insurance company, which at times can be a frustrating and overwhelming experience. The insurance industry is built on standard traditional practices that every insurer follows. In fact, the majority of insurance companies perform almost 85% of their activities in the same way as their competitors. However, the industry is all set to undergo a transformation as the digital story unfolds across Asia Pacific, which is home to around 60% of the world’s population and the engine for the future growth of insurance companies. Provided below are the key changes happening in the insurance industry:
Mobile is the catalyst for rising customer expectations. By 2020, 4.3 billion people globally will have a mobile subscription and more than half of them will be in Asia Pacific. Mobile is significantly changing customers’ behaviors and expectations; Forrester Research calls this phenomenon the mobile mind shift. Hyper-connected customers are demanding that their insurance companies provide them with the same customer experience that they get from Uber, Google, and other digitally native companies. Gartner estimates that by the end of 2015, personal lines property and casualty (P&C) insurers that do not offer online and mobile transactions will lose one-quarter of their current market share.
The role of traditional advisors/ agencies is becoming irrelevant. Today, customers do their research outside of traditional channels and only contact the insurance company after they’ve made their decision. The research shows that more than 60% of people in the region do their research online, with many of them even buying insurance (esp. non-life) online. iMoney, Brokerfish, and Money Supermarket are just a few examples of the price comparison sites that customers are leveraging. As more and more people are living in an increasingly digital world, we will continue to witness significant growth in digital distribution.
Non-insurance players are posing a threat to insurers. In the future, traditional insurers will not only have to compete with other insurance companies in the market but also with retailers, automobile equipment manufacturers, airlines, and telecom providers. Coles in Australia, Rakuten in Japan and AirAsia are just a few examples of how this threat to insurers’ business models could come from just about anywhere. And now, Google is trying to transform the insurance industry with the launch of its insurance price comparison site, and online advisory services.
The trend of customers becoming self-sufficient in handling more of their insurance needs is already evident in the early stages of the insurance-buying process. They demand a quick, responsive and multichannel service and are pushing their insurance companies to adopt a new digital insurance operation model that is built on ‘data’. The data is the lifeblood of insurance companies but it is not yet being viewed as a key competitive differentiator by firms. Hyper-personalization is the new norm in this hyper-connected world. The key is to reimagine the whole customer experience. Imagine a situation in which, when you are blessed with a child and you share your happy news with family and friends through social media, your insurance company notices it and proactively reaches out to congratulate you and to advise you to increase your life cover to safeguard your extended family. That’s engagement! In fact, customers who are emotionally engaged represent a 23% premium in terms of wallet share and profitability for firms.
The digital revolution is already underway in Asia Pacific and will intensify faster than most insurers currently expect. Insurers that embrace data to connect with customers and revamp their distribution channel to develop a new competitive differentiation are likely to succeed in the future. Cognizant had published the report on how to leverage data in building a code halo economy for insurance which you will find interesting to read.
What’s your view on the future of insurance companies?