Comment & Analysis

The digital trends forcing insurers to innovate

By Assaf Tayar, managing director at BCG Platinion

From the ever-increasing popularity of social media and growing number of connected devices to the exponential growth in data and reliance on smartphones, organisations are inundated with new digital trends. In retail, this might be the desire to DM a store to ask for a delivery update, in the health sector, it might be the ability to have a video call with your doctor, while in insurance it might be the use of telematics to reduce a policy price.

While some trends come and go, most are influenced by technology; setting a new precedent for consumer expectations. Once a few organisations start meeting a digital trend, like real-time pricing, consumers believe all organisations should be able to provide the same service or product. 

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This has been a reoccurring concept for years and years, but the pandemic has thrusted technologies into the spotlight even more. In fact, technology became a lifeline for all insurers during the pandemic and will have eternal impacts. To confirm this, research from Information Services Group (ISG) found that 90% of insurers said digital transformation will now be accelerated in the sector, and 95% agreed that customers want more digital products and services. 

Technology significantly changes every six to 12 months. A key strategic business will be able to realise how technology changes work processes and society. Yet before a business invests in any emerging digital trends, there must be a call to action. They must become bionic. 

Bionic thinking requires taking a human-centric design approach to both services and products. That means strategies must include a mix of human expertise and technology capabilities leading to successful implementation and adoption. A bionic company must be combined with the flexibility, adaptability, and comprehensive experience of humans while focusing their human and technological capabilities around business outcomes.

All of this can only come from clear strategy and purpose that outlines a roadmap from start to finish forming connections between people and IT. Then, the bionic business can adapt to new emerging technology trends, providing personalised customer experiences, improve processes, and build new offers — and moves fast to achieve this.

Real-time pricing optimisation

Bionic businesses can answer consumers wants and needs on new emerging trends, for instance real-time pricing. As with all industries, businesses look for a competitive edge, and here price plays a fundamental role. Combined with the switched on, savvy consumer, a competitive insurance price is a necessity, particularly in life insurance and general insurance, such as auto and home. 

In fact, FintechOS stated that nearly a quarter of consumers (23%) even expect personalised services and want guidance and advice specific to them from their insurer. Yet only with data that provides granular, smart insights can insurers provide personalised pricing.

Gaining this competitive edge means insurers must invest in data infrastructure to better harness internal data and, perhaps more importantly, data from external sources. Sophisticated insurance carriers should evaluate more than 30 new external data sources each year that they use to develop new features to embed in their pricing and rating models. 

For instance, in the domain of auto insurance, telematics devices in cars can collect data. Insurers can then take this data to incentivise good driving behaviour, or even apply gamification concepts, and in turn reduce the insurance price, make it more competitive and provide a greater level of customer satisfaction.

Claim prevention  

While price is a core element, it is not the only consideration. Because unlike many products and services consumed, insurance is different. It’s something many pay for, but don’t like to use. 

Claims prevention – or in simpler turns – reducing risk is a trend that has become increasingly more prevalent. Modern insurance players that lay the groundwork implementing a data approach and sophisticated technologies will be positioned to evolve and make bold moves such as intelligent risk reduction.

Take a skiing insurance policy, for example. Not only can an insurer deliver a policy offer to the skier in real time, it can also use location and movement information – and even weather data – to calculate a highly accurate risk profile for the individual skier. It can be so granular that if the skier ventures off the established trails or if a storm has made slope conditions particularly slick and raised the likelihood of an avalanche, the skier would be notified by smartphone of the increased risk. 

What’s more, when insurers tap into these technologies, such as big data, IoT, telematics, machine learning and AI can transform claims prevention; the reduction in risk has a direct impact on indemnity expenses – serving as a huge bonus to both consumer and insurer.

Bionic

Both real-time pricing and claims prevention are just a couple of consumer touch-points examples that, when done correctly, will lead to higher satisfaction rates. Similarly, insurers need to evaluate all the varied touch points to improve overall customer satisfaction levels, as well as eliminate processes that cause frustration, such as asking the customer to submit data or documents that could be gathered automatically. 

Over the past 18 months consumers have been offered endless seamless digital experiences, and insurers must too be able to deliver hassle-free services that eases or enhances the customer journey. Yet for this to all be possible, then the bionic approach is fundamental. It’s what paves the way to future success and allows organisations to quickly respond to change and uncertainty, making growth a likelier prospect. 

For instance, instead of automating simple, high-volume tasks and leveraging digital channels to streamline interactions, the bionic insurer leverages AI to deploy automation at scale, uses machine-to-machine capabilities to deliver a step change in operational efficiency, and supports agents dynamically in real time.

Bionic operations will improve the customer experience in two ways: by eliminating unnecessary, burdensome steps along the customer journey; and by delivering innovative, high-value services that benefit the customer. The insurers that adapt and innovate in such a way will be best positioned to tap into the significant opportunities and trends across the entire insurance industry.


Assaf Tayar is managing director at BCG Platinion

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