From market instability to catastrophic losses from natural disasters, insurance companies face many conflicting challenges. But the toughest challenge facing the insurance sector now is the adoption of digital technology.
Digital is transforming consumer behavior and driving insurance executives to reassess their business models. Our 2013 global survey of more than 100 insurance companies explores digital readiness, leadership strength and future strategies. With many insurers on the sidelines of the digital shift, it’s time to make the digital agenda a higher priority and tackle the challenges ahead.
Insurers view digital as a key priority, but are lagging far behind
While the majority of insurers believe in the importance of digitalization to deliver the customer experience, many express concern that they will be left behind as shorter-term corporate priorities lie elsewhere.
79% say they are “not setting the baseline” for digital or are “still learning.”
57% have operating models that do not faciliate digital.
89% don’t consider past interactions when recommending products or services to online customers.
Key findings from the survey
1. Insurers acknowledge their current low levels of digital maturity and the need to take action. Almost 80% of respondents do not see themselves as digital leaders, and are instead trailing the spectrum in customer engagement, analytics and adoption of mobile and social media. The majority believe instead that they “only play the digital game” or are “still learning to use digital capabilities for a competitive advantage.”
2. Companies have high digital ambitions – but are they grounded in reality? While insurers aspire to future digital leadership, they haven’t made the significant improvements necessary to realize their ambitious digital objectives. By their own admission, more than two-thirds of insurers have delivered some easy quick wins, but only 10% cite transformational changes to digital capabilities.
3. Insurers are holding themselves back. Internal factors — legacy technology, slow pace of delivery and cultural constraints — are hindering digital progress. Focusing on key enablers such as culture and innovation will release significant future value and enable companies to better grasp digital business opportunities as they arise.
4. It’s all about retention through improved customer experience. The two biggest drivers of digital strategies are “enriching the customer experience” and “regaining more direct control of the customer relationship.” While the cost of acquisition continues to rise, retaining existing customers is an increasing necessity and should be a critical and measurable benefit of any improvement in the customer experience, digitally enabled or otherwise.
5. Distributors are digital customers, too. Insurers cite intermediary and agent channel strength or resistance as one of the top three inhibitors in implementing a digital strategy. Sharing the benefits of investment in digital and communicating a clear mutual value proposition to deliver a better customer experience will help to minimize channel conflict.
6. Analytics are critical to digital success. Segmentation, customer data analytics and predictive modeling emerged as the digital skill set most in demand, followed closely by technology and marketing capabilities. Analytics capabilities are a prerequisite for extracting maximum value from digital investment.
7. Insurers need to embrace the mobile and social media wave. With mobile and tablet use growing exponentially, neglecting mobile is turning one’s back on the future. Similarly, insurers could be taking social media more seriously, recognizing its value as a relatively inexpensive marketing tool and a means to engage with and influence skeptical, digitally-savvy younger consumers.
How insurers should respond
Adapting to a new digital landscape presents many difficulties for insurers as they face challenges in introducing new channels to market while simultaneously remodeling traditional ones.
While no single solution can seamlessly integrate digital into a business, there are elements intrinsic to all effective digital strategies. Insurers need a vision that focuses on the basics:
- Framing the investment argument for digital
- Building the analytics infrastructure
- Embedding a culture of innovation into the organization
A robust digital strategy begins with a plan and a sound understanding of the practical realities of implementation. Each of the elements – corporate strategies, customer expectations, target operating models and enabling frameworks – will shape each other as digital capabilities develop.
Related Resources
Download the full study
Review an illustrative summary of the survey
View the on-demand webcast
Read the press release
Authors
Graham Handy collaborated with Shaun Crawford in writing this article and in preparing the deeper study based on the survey. Shaun Crawford leads Ernst & Young's Global Insurance Industry across all services; audit, consulting, tax and corporate finance. Although based in London, he spends the majority of his time traveling across the Americas and Asia.
