Digital and technological integration is changing the workplace, and the insurance industry is no exception.
Approximately one out of four insurers are taking the lead in digital transformation, and this elite group is already aiming to achieve significant benefits. These are the companies to watch because, if they are successful, competitors will find themselves scrambling to catch up.
But despite the fact that most insurers are aware of the need to invest in digital technologies, many feel that the change from traditional models to new practices are not always welcome. In fact, for some carriers, digital technologies create more challenges than opportunities.
And yet, digital front-runners are positioned to reap the benefits of their adaptation and investments, despite the discomfort of leaving traditional practices behind.
Who is leading the insurance industry’s shift to digital-first operations? The Accenture Digital Innovation Survey, released in December, knows.
The research, which surveyed 141 insurers, reveals that those who are leading the way tend to be large insurers, whose planned digital investments for the next three years average $56 million. The average industry spend hovers around $43 million.
Moving forward, insurers are looking to expand their digital value creation, including doubling their premium growth and expanding their customer bases.
But even these expectations are substantially lower than what Accenture proposes in its latest survey. All insurers, according to Accenture, should aim to be digital leaders in the field. The leaders in digital transformation have a clear set of characteristics, they say, and carriers looking toward the future should both improve their own digital capabilities while expanding their online activities to remain competitive in the evolving market.
Click through the following slides for the six characteristics of digital leaders.
1. They have a digital strategy that covers the entire insurance value chain
Insurers understand that they need to expand traditional value chains, or even create new ones, in order to weather disruption. Creating new partnerships, investing in innovative companies or broadening their offerings to include non-insurance products are just some of the ways companies can prepare for and initiate change.
The survey reveals that those who have made changes have also made the most progress in distribution. About 72% are planning to form new distribution partnerships in the future, or have already done so. Targets for future partnerships often include banks (69%); Internet players like Google, Apple and Facebook (44%); and aggregators (44%).
2. They have an established or are working on a single view of the customer
Results reveal that the minority of insurers regard customer-centricity as an integral way to conduct business. Only 25% have a single view of the customer, which involves improving the customer experience across multiple contact points. And even though an additional 35% of insurers are working to achieve these goals, the combined total still represents less than two-thirds of Accenture’s survey sample.
The report claims that additional progress will need to be made in this area, particularly since there is a clear link between digitalization and customer-centricity. This will entail a much more far-reaching process of transformation.
However, this will not come easily. There is a disparity between what insurers know should be done and what they are actually doing. Accenture notes that this may be due the challenges of overcoming legacy systems, which respondents identified as the No. 1 obstacle in executing a digital strategy. Other factors might include insurers’ mixed views about the digital revolution.
3. They have purchased or plan to purchase innovative companies or start-ups to acquire the latest digital capabilities, positioning themselves favorably within the competitive digital market
The survey results revealed that 43% of respondents plan on completing (or have already completed) the acquisition of a start-up or innovative competitor to help them extend their value chains and better position themselves for digital innovation. Most carriers expect their industry peers to make acquisitions over the next three years (82%). New insurance start-ups are expected to make up 59% of these acquisitions, followed by companies specializing in telematics (47%), aggregators (43%) and analytics companies (38%).
As insurers enhance their understanding of customer intimacy in the current business environment, Accenture also expects to see a growing number of industry initiatives to provide a greater range of value-added services to clients.
4. They believe establishing new partnerships is key to differentiation
The process of moving from product- to customer-solution centered thinking is only the first step for insurers. In order to deliver effective and innovative solutions, insurers will need to develop new partner ecosystems, according to the Accenture report.
These new partnerships will help insurers go beyond simply finding new distribution channels. Instead, they will aid the shift in focus beyond the sale into the customer journey, and beyond the insurance product to the ultimate consumer need, including financial security.
Survey results show that almost two-thirds of insurers are already planning to offer non-insurance products and services, confirming that they see themselves becoming part of a more diversified, and more relevant, customer-lifestyle solution.
5. They use digital technologies to provide personalized products and services, pleasing customers while differentiating their services from their competitors
Survey responses indicated that data and analytics are the most important components of most insurers’ overall digital strategies. In order to successfully compete against traditional competitors, as well as new competitors from outside the insurance industry, insurers must understand what their customers want and put themselves in a position to meet those needs.
Accenture notes that the growing use of digital (especially mobile) channels, a desire that insurers help to manage risk rather than just insure it, and the demand for highly personalized solutions are among the most common desires. Customers are also willing to share personal data if it means having their needs met.
Insurers have always been concerned with accessing data and using it well, and there is no question that the potential for data is growing. This includes the potential to not only price more accurately, but also to enhance the customer experience through personalized interactions.
6. They are three times more likely to engage with their target audiences on social media
Accenture’s analysis suggests that carriers will be investing approximately 0.2% of premium income per year on digital initiatives over the next three years. Many have already made investments in mobile communications along with apps, data mining, predictive modeling and social media monitoring.
It is not enough to view digital as an approach that can complement a traditional business strategy. It needs to be a tool to drive strategic decisions. As the gap between digital innovators and digital followers is continuing to widen, the Accenture study proves that it’s time for the rest of the industry to follow suit or get left behind.