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Digital transformation will dictate the future of insurance brands

By Tony Tarquini, European Director of Insurance at Pegasystems

Digital transformation has provided the solutions to a great number of customer service ills which have been acting as barriers to business performance for years. Omnichannel approaches to customer service have now transformed the customer experience across the board and raised expectations significantly. Amplified by insuretechs,the fiercely saturated insurance market now needs to address these barriers if they want to maintain share of customers.It’s time for insurance companies to escape the matrix and take notice of the developments that are changing the industry around them.

Tony Tarquini
Tony Tarquini

Why is it then, that some insurers are reluctant to join the digital transformation game?In, surely, the same spirit as any other customer group, policy holders need to feel that they are being supported through their spending decisions. In the current setting, customers also want to feel this support via a range of channels and devices. And the benefits show.

Improvements to services in these areas have already helped personal banking, loans and credit brands to facilitate a seamless and effortless process for on-boarding and customer retention. Meanwhile,the parameters of customer expectations have been similarly transformed elsewhere.

For many in the insurance industry it certainly seems that there has been a misinterpretation of what digital transformation entails. In the 1990s/2000s e-commerce removed a huge tranche of frictional costs in insurance, particularly personal lines distribution by moving to a self-serve model.

Although this was good it was single channel and came at the expense of personalisation of the relationship. As time has progressed, rather than taking advantage of the new tech innovations that are allowing many businesses to excel simultaneously at automation and at-scale relationship building, insurers are perhaps more concerned with merely keeping up with their competitors in other markets. In reality, digitisation began a while ago and some are being left behind.

Amid competitive pressures, those who have not yetembraced digital tools due to perceived barriers can still achieve strategic advantage.

The biggest barrier to any digital transformation project tends to be legacy systems. This is no different for insurers, many of which have to navigate a maze of old, intertwined, disparate systems, each in a different stage of data transformation.

In the wake of insurtechs, which seemingly take on the digital leg work for insurers, the digitisation battle may seem futile. This is especially the case as Big Tech brands Amazon and Google enter the playing field.

And since most insurtechs appear to specialise in industry niches, they might not initially pose much of a threat to the traditional insurer’s wider customer bases. However, the vast volumes of insurtechs that are entering the markets are collectively poaching customers and making a significant notch in insurers’ share of customers. It is a case of death by a thousand cuts.

Insurers who want to avoid losing their customers in the digital shift will have to consider their options.Understanding and responding to a customer always has and still is the key to building a good customer relationship. Technology platforms which collect specific datapoints offer the best solution to discovering customer product, service and payment preferences in a world which has transcended a necessity for face-to-face meetings.From-click to buy cover, digitised quote acceptance and the ability to change cover online, customers seek end-to-end customer journeys which are effortless, comprehensive and instant.

The nature of most insurance businesses’ vertical markets will dictate the number and type of operational systems, processes and variables it uses. Performing much the same way insurtechs do to speed up the process, insurance companies can accurately emulate them using a code layer from the back end. This can identify key areas of need for the customer and deliver on them using AI and machine learning processes as silent partners to intelligently inform customer interactions ensuring that they are objectively helpful, proactive and ultimately personal.

This approach should be equally effective across the communication spectrum. Simply providing an alternative platform is the first step, but to taking full advantage of popular digital channels like mobile, chat, social and web requires uniformity throughout the omnichannel customer experience.

A project of this type might seem overwhelming at the beginning of the digital journey. Arguably more daunting, however, is the prospect of attempting to operate and remain competitive without smart technologies.

As industry leaders slowly start the ball rolling, it will become clear that a collaborative approach to getting insurance on the digital road map is necessary.

Entrance into to a new, sustainable era of insurance that embraces technology will likely result in operational changes.Insurers who don’t want to be left behind may introduce executive roles to manage end-to-end business responsibilities such as heads of customer experience.

One thing is for certain: the digital reformation is on its way. If traditional insurers continue as they are, the insurtechs will no doubt pick up the digital slack,particularly in distribution.  By default those legacy players will be opting in to becoming a back-end service provider to the insurtechs.

As a strategic choice, it may be a valid option. However, insurers will risk their relationships with reinsurers with reservations about introducing primary carriers. Slightly more worrying, this model empowers the insurtechs to take control over their commission and eventually the premium, encouraging competitive pricing between insurance brands as they vie to ensure representation.

As the future of the market unfolds, insurers will have one overarching choice to make, and the speed at which digitisation can be achieved will influence the strategic decisions to follow. Although it’s not too late to make the change, now is the time for insurers to decide whether to take the blue pill or the red pill when it comes to digital transformation.