Insurance distribution is transforming and going digital at an accelerating pace.
According to an Accenture survey of more than 400 insurers around the world, more than half of carriers surveyed expect to have a wholly digital sales process within the next few years, while less than 20% say they have no intention of working toward this goal.
With higher service standards, rising customer expectations, continuous digital innovation, competitive pressure from new entrants and industries outsiders alike, and a wealth of emerging opportunities for growth, insurers are feeling considerable pressure to change.
As in any industry, there are a few insurance companies that have a clearly developed vision of the future and making investments in their transformation to realize this vision. Accenture calls these companies the "Digital Transformers," and they comprised 28% of its survey sample.
Most of the other companies surveyed (the "Digital Followers") are also investing in digital channels and other technologies, but their aim is less to transform themselves than to explore digital capabilities and to enhance existing products, processes and efficiencies.
Digital Transformers show an appreciation both of the disruption confronting the industry and opportunities such disruption creates. They are far ahead of the pack in deciding their courses of action and in embarking on the first steps of their transformation. The majority of Digital Transformers, for example, have either started connected insurance initiatives in relation to the Internet of Things or are planning to do so.
The survey findings identified six key distribution-related areas in which insurers are concentrating their resources and their attention. For each area, insurers wishing to become Digital Transformers need specific strategies along with tactical plans for execution. The key areas are:
1. Channel digitization
Insurance companies are accelerating the shift to a digital-enabled, omni-channel distribution model.
For many market segments, digital channels are playing an increasing role at every stage of the sales process, from discovery of information through advice and purchase, and insurers need to take a hard look at how best to leverage the strength of their physical and agent networks and determine which interactions should take place online. The level and pace of change mandates a strategy of active investment in new and emerging technologies and business models.
Insurers need to move beyond pilot programs and successive waves of experimentation and commit to the products, models and partners that will take them to the next era.
2. Insight-driven customer experiences
To an increasing degree, insurers are moving from a product-focused sales process to one that is intimately grounded in the needs of the customer. Insurers should take advantage of advances in data and analytics that enable them to develop customer segmentation models that allow them to better define customer strategies in addition to brand or product strategies.
3. Changing role of the agent
To deepen customer relationships, insurers are transforming the role of agents — with 63% saying they are giving high priority to refocusing agents to where they can add the greatest value. Insurers can benefit from new technologies to help relieve agents of routine tasks and focus them on deepening relationships and providing advice, but they also need to change incentive and remuneration structures to drive desired results.
4. Future of aggregators
As insurers rethink their distribution models for the digital age, and as the platform economy continues to take hold, insurance aggregators, which allow consumers to access insurance products from across the market, will be an increasingly important part of the channel mix.
Insurers can benefit from this trend, but to do so they will need to move with speed and position themselves favorably within the aggregator ecosystems of their making or choosing.
To offer their customers a broader range of relevant products and services, leading insurers are creating or joining new ecosystems that transcend industry boundaries and facilitate end-to-end buying experiences for customers, and enable cost-effective access to critical data necessary to improve the customer experience, pricing, underwriting, and claims.
Carriers need to make themselves attractive ecosystem partners by improving their digital capabilities, optimizing their architecture for cross-sector integration, and embracing external collaboration and innovation.
6. Internet of Things
In just the last 12 months there has been a two- to three-fold increase in the number of IoT-related products, services and pilots focused on homes and buildings, health and fitness, and other wearables. This means insurers can move from indemnification, which is becoming increasingly commoditized, into protection services, not only in transportation, but in homes and buildings, life and health, and business operations.
New competitors with novel offerings, and a steady flow of technological innovations, are reshaping customers’ expectations and changing the traditional insurance landscape. Some insurers are reacting to this disruption by seeking to defend their legacy business and distribution models. Their more successful peers are becoming disruptors in their own right. Insurers need to make critical decisions about whether they become Digital Transformers, dictating the nature and pace of their own transformation, or remain Digital Followers and let others set the agenda.
Erik Sandquist is a managing director for Accenture Distribution and Marketing Services in North America. Jean-Francois Gasc is a managing director at Accenture Strategy.