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Perspectives

Assessing Digital’s Impact on APAC Insurers (Part 1)

2017-02-07


Carriers throughout the region understand that digital is vital to their future success and are working to convert that belief into a transformation strategy, according to our primary research.

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This is the first of a two-part series.

Insurers in the Asia Pacific uniformly agree that digital is vital — but each defines digital differently, based on their regional realities. That is one finding from our recent survey intended to uncover what digital means to APAC insurers. 

Through interviews with CXOs from leading carriers in the Middle East, India, Greater China, Australia, New Zealand and Japan, we also identified key insights on digital priorities, and the challenges APAC insurers face with digital transformation. 

Regional Variations 

For a variety of reasons — cosmopolitan populations, untapped markets and a lack of legacy technologies — Asia-Pac insurers have always been more innovation-minded than their worldwide counterparts. But while all respondents said their organizations are undertaking digital programs, such initiatives are diverse, as they are strongly tied to the region’s business culture and carrier maturity (see figure below). 

For instance, insurers in China are embracing peer-to-peer and crowd-funding business models to address the efficiencies needed to win over a mammoth, heterogeneous market. Meanwhile, with their affluent populations and exposure to Western insurers, Hong Kong and Singapore have been more open to the digital ideas flowing from the U.S. and Europe, such as digital health and wellness programs. 

“Lots of untapped markets and segments are still left to explore,” said one CIO we surveyed. “Digital will help us penetrate and reach out to prospects. Sooner or later, models are going to evolve, but we have to adopt it now.” 

Figure 1

Despite these regional differences, our research revealed that digital is top of mind for the majority of APAC insurers and that these organizations are facing the digital challenge with a clear-eyed view of what it takes to succeed. For example, APAC insurers agree that: 

  • Digital transformation is both a technology and business problem. Most respondents (71%) have a clear digital roadmap and have identified a digital task force to lead the charge. Far fewer (20%) see digital as a technology-only challenge.

  • Digital must be part of the corporate strategy. The majority of respondents (64%) are currently undergoing or planning a formal digital transformation within the next year. Fewer (33%) are taking a piecemeal approach by adding technology components (apps, portals, platforms, etc.) to the business where necessary.

  • Digital introduces both threats and opportunities. Most respondents (93%) said digital will fundamentally change their existing business model and that it’s crucial to move quickly, especially to defend against new, nontraditional competitive threats.

  • Investment is needed. While respondents said they currently allocate 6% to 10% of their IT budget on digital, 60% plan to boost investment to 15% of their IT budget over the next two to three years.

  • Customer experience is the top priority. Roughly 79% of respondents said that redefining customer experience is their topmost priority. That focus may shift to rolling out new products, with the percent of respondents who indicated interest jumping from 43% to 79% in the next 12 to 24 months.

  • Drivers are both financial and strategic in nature. Nearly 87% of respondents said improving revenue and reducing operating costs are key digital drivers. Others take a more strategic view, with 80% believing digital will help them differentiate their future market positions.

  • The digital journey is a long haul. Top challenges to digital transformation include a lack of organizational structure, internal skills and partnerships, as well as the difficulty of keeping track of the ever-changing behavior of connected customers. Other obstacles include conflicting business priorities, lack of collaboration between departments and the difficulty of formulating a business case. 

  • Organizational shake-ups are needed. APAC insurers understand they need to shift their partnerships, cultures and processes to tackle digital challenges. About 74% of respondents said they want to partner with product, data, analytics, open source communities and regulators to develop innovative solutions. About 64% are re-aligning employee incentives and growth plans to enable transformation. Meanwhile, 76% said they have moved away from traditional management methods.

  • Sustained excellence requires top leadership. About 74% of respondents have already appointed a senior executive to lead the digital strategy. For 85% of respondents, the CEO is actively involved in digital transformation, which reinforces the conventional wisdom that digital is indeed a top-driven, across-the-board initiative.

Digital CX Challenges

With more than 76% of CMOs in our study actively involved in digital transformation, it’s clear that digital is considered vital as a customer-centric, problem-solving mechanism. Fully 80% of respondents agree that revenue can be increased by addressing customers’ changing behavioral and purchase patterns. 

However, while insurers have taken active measures to strengthen existing direct-to-customer assets — such as sales and service portals and apps — many of these efforts have not been embraced by customers, according to 57% of respondents. Increasing success requires a blended technology-business approach that:

  • Provides flexibility across devices and platforms.

  • Equips the business to meet customer expectations.

  • Engages with customers to influence their online behavior

  • Exploits technology to get closer to the customer.

  • Designs solutions that make interactions easier.  

Looking Ahead 

As our research shows, APAC insurers are fully bought into the digital promise. But it will take more than just an overhaul of existing IT assets to improve their digital fate. In part two of this series, we’ll look at the top focus points for digital transformation, challenges to overcome and words of advice to enhance success. 

To learn more, please read APAC’s Digital Insurance Transformers: Illuminating the Way Forward, or visit our Insurance Practice.

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Assessing Digital’s Impact on APAC Insurers (Part 1)