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Why going digital for insurance companies is the new premium

March 5, 2015 – by Thijs de Boer &samhoud consultancy

Ok, where to start. As the world is rapidly getting digital, the insurance market is not there yet. Insurers are struggling with a low-interest product, with minimal customer touch points, IT legacy issues, bad reputation, shifting risk pools, new entrants on all business lines and lowering margins.

So it is not business as usual. As insurance companies feel the urge to catch up with other industries in their level of digital maturity, they are still chained to a traditional change aversive mindset and an outdated internal legacy of systems and processes. So how to accelerate the digital transformation?

Here are three key themes:

1. Get the full picture first
Digitization is not only a front-end game; the total value chain is the playing field and linking digital initiatives are the key words. Based upon the insurer’s digital vision (if present…), a clear roadmap needs to prevent all bottom-up digital initiatives from being scattered around and not adding up. In other words, what is the impact of all digital trends upon our business model and operations and how do we manage it? Are we digitally fit enough?

As insurers have been investing in new digital models predominantly in P&C (often with targeted online brands), there is a need for a corporate digital vision across all business lines including a renewed vision upon the collaboration with agents, brokers and service providers.

2. Push the innovation envelope
Digitization is not a threat but an opportunity. The industry already showed the potential of telematics in P&C, predictive analytics in Life and Non-Life and new propositions like cyber insurance. In addition, almost all consumer groups are keen to consider new digital insurance products and services, especially people with higher income[1]. The challenge will be where to innovate, for whom and with what time-to-market. So having the right innovation ecosystem within the company as well as pushing for co-innovation with tech companies (e.g. dynamic pricing, website usability, big data) could transit insurance companies into the right direction.

3. Get people and culture into the digital modus
Insurance companies are uplifting their digital capabilities and probably not everyone will be capable to follow. Not only are they revising their core insurance skills with data management, (big) data analytics and digitization of processes, also additional capabilities like digital marketing and communications and media-and gamification elements can be injected. With the help of massive open online courses some of them are supporting all their people to beef up their digital know-how and capabilities.
The culture side will be one of the toughest nuts to crack. Large corporate insurers set up separate online brands but fail to fully understand and nurture their new kid in the family. Online brands do have a different approach to almost everything (progress on Combined Ratios, CPA-and IT costs, marketing approach) and the current insurance culture is not fully adapted to that. Changing cultures do not happen overnight but in this case it would make things a lot easier.

In short, as consumers are getting tech-savy, so are insurers. And as competition could be coming from anywhere with substantially lower cost levels and where small can beat big, all insurers are just at the beginning of a digital rollercoaster.

[1] MorganStanley/BCG Global Consumer Survey , 2014

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