Customers are better informed and more demanding. Yet most insurers have been slow to respond. And slow to use mobile and online technology to communicate with their customers across multiple channels. Can insurers adapt to the digital technology that’s changing financial services?
To what extent will target pricing, or individualised pricing, become standard for certain types of insurance coverage? These are some of the things that insurance leaders want to discuss with me.
Few doubt that the pace of the change and potential threat to their business from new rivals such as friendsurance (a peer-to-peer insurer that rewards small groups of customers with a cash-back bonus at the end of each year if they haven’t made an insurance claim) and insurethebox, a “telematics” car insurer that uses a black box to track the mileage of its customers and how safely they drive.
Insurers aren’t luddites but their priorities need to change. They’ve been investing in digital operations for years but mainly on online services experience, that are accessed easiest via a PC.
Mobile apps have been built – largely for customers to search for quotes. But examples of successful multi-channel communication (mobile, online, branches and post) are rare. Fewer than 14% of more than 10,000 US online consumers surveyed have engaged with a mobile insurance product, according to Forrester, a research company.
The priority should be to enhance customer loyalty and retention, not sales as my colleague Markus Franke hinted in his reportOmnichannel insurance: are insurers losing touch in the digital age?
Mobile apps – combined with Big Data, analytics, the internet of things (smart thermostats, car telematics), biometric (senors heart rate, temperature, voice stress, sweat) and wearable technology – can keep customers feel better informed about their health and possessions.
In return, insurers get better data on their customers, which can help them develop products and assess likely pay-outs more accurately.
In future, for example, insurers could use medical data to provide more individualised prices and cover for customers. Telematics could gradually replace traditional car insurance based on annual policies.
Insurers have begun to change how they use digital technology, although most have a long way to go before they become digital innovators. Like banks, many are saddled with back office systems that can be more than 30 years old and are expensive and a hassle to replace.
Change will be tough but insurers are used to remaining calm when dealing with fire, flood and other catastrophes. Digital disruption could be a great opportunity.