Insurers recognize the importance of digital technologies, and as a result have high ambitions in this area, but those ambitions may not be grounded in reality as insurers report having low levels of digital maturity and struggle to overcome self-imposed obstacles, says a recent survey.

In its survey, "Insurance in a Digital World: The Time Is Now," Ernst & Young says, "Insurers are currently lagging behind the digital curve, and conditions for future success are not yet in place. As a result, many may struggle to deliver on customer expectations; new entrants and digitally leading competitors will look to exploit this failing."

Making the case for the importance of digital technologies, E&Y points out that, today, "There are almost as many mobile subscriptions as there are people—6.8 billion compared with the global population of 7.1 billion." E&Y adds that one out of five searches for financial services comes via mobile, and, according to Google research, 65 percent of purchase journeys start on a smartphone before moving on to a PC or tablet.

But E&Y's survey of more than 100 industry players mainly in Europe, Asia-Pacific and the Americas shows that insurers are lagging when it comes to digital technologies, and they know it. The survey shows that 79 percent of respondents say they are "not setting the baseline" for digital or are "still learning."

While more than two-thirds say they have delivered some "easy, quick wins" in digital, just 10 percent cite transformational changes to digital capabilities.

Additionally, despite reporting high digital ambitions, nearly 70 percent of respondents spend less than 10 percent of their business and IT development budgets on digital, and not many insurers plan to significantly increase investment. "A surprising number of respondents do not know how much they spend, highlighting the disparity between ambition and delivery," E&Y says.

Based on the results, E&Y says, "Insurance companies—most notably life—trail the entire digital spectrum, from customer engagement and use of analytics, to adoption of mobile and social media."

E&Y notes that non-life insurers, particularly in auto and homeowners, are more advanced, but "digital adoption is still inconsistent within global organizations."

More than just lagging behind, E&Y says nearly half of respondents—47 percent—say they have no single cohesive digital strategy business case, although 57 percent indicate that, within three years, they plan to have "a regularly updated digital business case that integrates detailed budgets and forecasts with financial and HR planning."

Interestingly, insurers appear to be their own worst enemy when it comes to digital progress. E&Y says, "The main inhibitors of digital progress are legacy-technology constraints (80 percent), slow pace of delivery (64 percent) and intermediary and agent strength or resistance (40 percent)."

Only 12 percent of respondents say their organizational structure facilitates their digital strategy, while 57 percent say they have operating models that do not facilitate digital.

E&Y finds that most insurers use digital only at a basic level to support customer-value management. Just 11 percent say they use predictive modeling to identify prospects for targeted, personalized email-marketing campaigns, use online comparison tools, or encourage development of an online community. Eighty-nine percent say they do not consider past interactions when recommending products or services to online customers.

E&Y recommends insurers take the following steps immediately to help keep pace with competitors:

  • Create a digital strategy and clearly define ambition.
  • Identify initiatives that deliver the most upside.
  • Help distribution partners develop digital capability by sharing resources and expertise.
  • Frame the investment argument for digital.
  • Build analytics capabilities in step with digital.
  • Develop mobile functionality.
  • Take social media seriously.
  • Start to embed innovation in the organization.

In the near-term, E&Y says insurers should:

  • Consider organizational culture when contemplating transformation.
  • Embrace cloud computing to drive operational efficiency and effectiveness.
  • Create a sustainable culture of collaboration and innovation.
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