By Tim Queen, Head of Insurance Consulting, Cognizant
So far, insurers are ahead of the curve when it comes to investing in technology innovation. The strategic business advantages of digitisation initiatives, such as storing records in the cloud to minimise inconsistent information and errors, and automating pay-out calculations, has been long understood by insurance companies even before the pandemic struck.
However, challenges are abound for incumbents, who face growing competition from niche insurtechs and agile startups that enjoy the benefit of not being encumbered by legacy IT systems. And, while customers increasingly demand seamless experiences, the industry’s rigid regulatory environment makes it difficult for companies to bet on ambitious innovation.
The findings that emerged from our recent research with Economist Impact show insurers still have a long way to go before they are future-ready. Incumbents must carefully analyse the areas in which they need to change and act purposefully to remain relevant in the coming decades.
Navigating tough regulation
Insurers have long been reaping the benefits of technology, with 89% of survey respondents from the sector utilising cloud computing, whilst 74% had already implemented robotic process automation. These technologies have allowed insurers to handle their data more securely, improve customer experience and privacy, and design improved products and services.
However, the use of consumer data is still heavily regulated, particularly when it comes to what is permissible when measuring and identifying an individual’s risk rating. The need to tackle and comply with these current and emerging regulations is putting significant pressure on incumbents to ensure their data security, consumer protection, and sustainability solutions and initiatives meet regulatory expectations. That said, if they put innovation on the backburner, they could quickly lose additional market share to smaller, more agile start-ups.
Creating value for the business and customers
Currently, only 50% of insurers think that adopting new technology would have a major positive impact on generating or retaining new business. Much of the time, this is the result of larger insurers and incumbents relying on poorly designed apps or websites from digital retailers to interact with their new customers, which are not able to fully capture the wealth of data that can be generated in a transaction or product search, for instance. Without this valuable data, insurers miss the opportunity to learn valuable insights about their customers. The solution to this would be for insurers to build an API layer that can seamlessly integrate their systems with those used by retailers.
By doing so, insurers can create more value both for themselves and for their clients. Having a more granular understanding of their customers would allow insurers to personalise individual experiences. For example, subject to customers’ consent, health insurers could use digital channels to encourage users into doing more exercise or eating healthier food, both helping them lower the premiums they need to pay and reducing the risk for the business.
Long way to go
Many insurers have already begun using emerging technologies, such as conversational AI and natural language processing to interact with their customers, which has successfully allowed them to meet customer demands and expectations faster and more efficiently. For instance, chatbots have been deployed to manage customers’ claims from beginning to end. As a result, 67% percent of senior insurance executives have indicated that technology adoption had led to a significantly positive impact on customer experiences.
However, there is more to be done and more benefits to reap. Currently, less than a third of insurers are using data to guide decision-making processes, according to the research. Clearly, executives need to develop a comprehensive strategy to maximise their companies’ use of the abundant valuable data that is available to them. By doing this, they will be able to uncover more insights, improve customer journeys and develop a system in which teams can share important information seamlessly between themselves.
Meanwhile, data safety regulations would be fulfilled and customers’ privacy would be respected. This is key to making a more resilient and flexible business fit for the future.
Next steps for insurers
Although insurers have made many positive strides with digital transformation, they’ll need to make sure they’re prepared for the increasingly difficult and turbulent future ahead of them. Competition is increasing, regulations are adjusting to a more uncertain climate, and consumers are growing increasingly demanding with heightened expectations.