Tackling Digital

It is true that Rome was not built in a day. But, with the right support, it became a city of rich culture, impressive architecture and attractions that have kept people coming back for centuries.

Most insurers are looking to build companies with similarly strong foundations and innovative approaches that, like Rome itself, will stand the test of time. These days, though, getting the business strategy right means getting the digital piece right. And for many insurers, that is proving to be tough.

Insurance in a digital world: the time is now – a recent EY (Ernst & Young) survey of more than 100 insurance companies – found that insurers have been slow to embrace digital across the globe. Of those surveyed, almost 80% do not see themselves as digital leaders, believing instead that they “only play the digital game” or are “still learning to use digital capabilities for a competitive advantage.”

While more than two-thirds of insurers polled globally feel they have delivered some quick, easy wins, it has not been accompanied by a long-term strategy to realize their ambitious digital objectives. In fact, nearly half of insurers say that they have no single cohesive digital strategy business case.

The findings represent a missed opportunity that could give property and casualty insurers in Canada, and around the globe, an edge over the increasingly broad pool of competitors.

Building out a comprehensive digital strategy can empower insurers to better meet customers’ changing needs, drive retention and, ultimately, improve bottom-line performance. The challenge is knowing where to start, and how to make it work for your company.

UNDERSTANDING THE LANDSCAPE

For insurers, embracing digital is about much more than online distribution channels. From mobile to social media to cloud computing to analytics, digital technologies can be applied across the entire insurance value chain to help engage customers, improve underwriting accuracy and pinpoint the best reinvestments.

Admittedly, there are many factors holding insurers back from realizing their digital ambitions. Internal factors like legacy technology and culture are valid challenges. But, in order to grow, insurers need to evolve and respond to digital pressures, or risk losing their competitive advantage. 

GETTING SUPPORT FROM THE TOP

While 40% of insurers surveyed by EY say their digital strategy has support from senior management, more than one-third of respondents believe that support is “not always backed by actions, budgets or resources.”

Further, the survey found that 79% of p&c insurers globally spend less than 10% of their business and IT development budget on digital, and more than half lack the right operating model to deliver digital capabilities. That is a major barrier.

When ambition and investment levels are disconnected, technological transformation usually fails. Therefore, it is critical insurers’ projected spend is realistic and clearly matches their ambitions.

Interestingly, the survey found that most of the biggest barriers preventing insurers from achieving their digital ambitions come from within their own organizations. While it would be easy to blame external causes, findings indicate the main inhibitors of digital progress – in addition to support from the top – are legacy technology constraints and slow pace of delivery. That is where analytics can come in.

REALIZING THE POWER OF ANALYTICS

Analytics is a bit of a buzzword these days, but for good reason. In the EY survey, analytics capabilities – the ability to look at and decipher meaningful patterns in data – emerged as the most in-demand skill set for insurers.

The right analytics are a critical component of conducting business in any sector these days. But in the insurance industry in particular, well-developed analytics capabilities are a prerequisite for extracting maximum value from digital investment.

With the right skill set in place, analytics can transform the business in a virtually endless number of ways. Never before has there been so much potential data at our fingertips, and the technology to potentially do something with it – and that is the key.

With so much data – data that is also constantly changing – making sense of it can be overwhelming, and often fruitless. Knowing what one is looking for, having a goal, can certainly help to focus the analysis.

Asking the right questions when it comes to data is critical. Too often, companies are looking at data that either does not make sense or that is irrelevant.

Once the right analytics capabilities are in place, a digital strategy will be more grounded in delivering on those ever-important changing customer expectations.

TYING BACK TO THE CUSTOMER

Success in embracing analytics, and digital in general, all ties back to delivering on changing customer expectations.

Sixty per cent of survey respondents say they are concerned that customers will ultimately leave them. And we know from previous insurance customer surveys that improving the quality and frequency of contact boosts customer loyalty and retention.

Conveniently – you guessed it – digital technology provides a real opportunity for companies to improve and personalize their communication with their customers, often without a disproportionate increase in costs.

When it comes to cross-selling, the survey found a startling 89% of insurance companies do not leverage past interactions when recommending products or services to online customers. In fact, just 1% currently offer online rewards, discounts, apps or live website assistance.

Failing to communicate at these critical times is a big missed opportunity to engage with customers. The EY report cites the following example, according to Forbes.com: “Kodak did not fail because it missed the digital age. It actually invented the first digital camera in 1975. However, instead of marketing the new technology, the company held back for fear of hurting its lucrative film business, even after digital products were reshaping the market. When Kodak decided to get in the game, it was too late.”

The survey shows that insurance companies are vulnerable to that same kind of risk, as supermarkets and airlines begin to sell financial services and insurance products online.

Especially given the sharp increase in mobile use in general, insurers need to ensure that they can deliver the services their customers expect not just online, but in mobile format.

Currently, only 43% of insurers provide mobile quotes compared to 72% who provide quotes online. And while being able to submit a claim via mobile is important, by offering mobile apps for things as simple as company information and self-service, insurers can add the value, ease of interaction and convenience that customers now demand.

Tied into that, insurers need to embrace the social media wave, especially as a relatively inexpensive marketing tool and a means to engage with and influence skeptical, digitally savvy younger consumers. Many p&c insurers surveyed already realize this potential – nearly 80% report they already use Facebook.

As with data, however, social media, customer expectations and digital technologies them selves are always changing. So getting connected is only the beginning.

With the pace of change so fast, and accelerating, standing still when it comes to digital is simply not an option. In fact, doing nothing means falling further behind. For insurers, the key to realizing their digital ambitions will be fine-tuning – and regularly updating – a strategy that integrates detailed budgets and forecasts with financial and human resources planning.

Even with fulsome and appropriate support from the top, insurers will need to achieve significant – and rapid – improvement to close the current gap between their ambitions and their current digital reality. But as customers continue to demand considerable changes in how their insurance is delivered, the winners will be those insurers who execute well against those digital ambitions in the coming years.