If the incessant stream of ads riding the commercial airwaves is any indication, insurance is – and for the foreseeable future will remain – a highly competitive business. Differentiation is the key to winning, whether it’s customers, loyalty or profits.
This is why technology in insurance is becoming key to success. “Keeping the lights on” is no longer good enough, especially for those operating in a highly-regulated, commoditized and industrialized business such as insurance.
So what’s next? How will IT ultimately fuel competitive differentiation? And what are executives’ primary concerns?
To answer those questions, we recently conducted a phone survey of 100 senior-level North American insurance administrators. We asked about their concerns and current and planned strategies in all lines of business – including life, property and casualty, retirement and wealth management – as well as their enterprise processes, data warehousing and information technology.
To begin with, it’s important to understand the industry's competitive landscape, as seen through the top reasons that consumers switch carriers (see Figure 1).
To keep customer churn to a minimum, insurers are striving to balance operational costs with the investments needed to innovate. Here’s where the IT focus will be for the foreseeable future, according to respondents.
Smarter customer interactions.
Dealing with insurance companies is something many consumers dread. This is largely due to painful and time-consuming processes that challenge, confuse and frustrate people on both sides of the equation. To improve customer satisfaction, insurers must address the underlying processes that influence these touchpoints.
Most respondents believe their processes need improvement in order to reach their performance goals, and one-third worry that their processes will not support growth in the next two years. But our research also shows that insurers that have modernized their processes – and fortified them with new technologies such as social, mobile, analytics and cloud (the SMAC Stack) – are more confident and optimistic than those that haven’t or are still in the early stages of doing so.
Digital services and models.
Insurance leaders anticipate significant investments in digital technologies over the next couple of years, according to our study. By 2017, self-serve portals will be the leading customer touchpoint, especially on mobile devices, which many consumers deem critical when interacting with all service providers on a daily basis, not just their insurance company. Forward-thinking carriers are also examining metered services, such as “pay as you drive” (PAYD) and “pay how you drive” (PHYD), to better serve customers and manage risk.
While these changes may not be transformational in and of themselves, when coupled with the ability to capture, understand and analyze a customer’s likes and dislikes in more detail, they can yield smarter, more intuitive channels for engaging customers. That could include, for instance, a micro-policy that lasts for just an afternoon to insure an impromptu trampoline party with just a click of a button.
Understanding and applying customer data and insights can help carriers create personalized products and services to further differentiate themselves. With the help of Code HaloTM thinking and SMAC technologies, for example, insurers can predict why one neighborhood is prone to soil liquefaction in a California earthquake, or why a 200-meter-long line of windbreak trees is the reason one side of a street in Oklahoma would be spared the devastation of an EF-3 tornado. Code Halo thinking can also help insurers gain insights from the piles of data collected during underwriting submissions, claims adjustment, survey imagery, witness notes, support calls and social media interactions.
As one life insurance respondent said, “Customers appreciate companies that make their lives easier, so make it easy. By leveraging information with analytics, insurance companies can do that while distancing themselves from the competition.”
Reduced operational costs.
Long a perennial goal of IT, this mandate is here to stay. To better manage speed and costs, most of the respondents were working with a sourcing partner to provide some portion of their operational functions, including claims and policy servicing, marketing and even underwriting. We expect this trend to continue for the next two to three years, but with an increasing amount of agency work handled through partners, as well, as insurers return their focus to core activities.
For example, as insurance companies expand their online interactions and enable capabilities such as geo-location and mobility, back-end processes will need additional analytics and the ability to process information on-the-fly to streamline processes.
At its core, the insurance business is fueled by information. This is why Code Halo thinking and SMAC will become the catalysts for differentiation. While social media may have spurred the change, this isn’t just “a Facebook thing” or “an iPhone thing.” To win in the new digital marketplace, insurers need to better understand and predict customer needs and preferences for how they want to consume insurance products and services.
Forward-thinking companies are already winning decisively due to their ability to mine insights from the digital information surrounding people, organizations and things. When properly harnessed, this data contains a treasure trove of insurance value.