Evolutionary and Disruptive All at Once
There has been a fundamental shift in customer values in the insurance sector, studies and experts tell us. This is being driven by technology. As time goes on, customer opinions will no longer be solely based on brand loyalty and confidence in advisors, but increasingly on digital social networking and self-service.
Digitalization is not replacing advisors, but it is changing their role and what customers expect of them. Digitalization does not automate existing products and services, it creates new ones. Digitalization doesn’t replace things, it modifies them. It modifies roles, segments, products, and processes.
The change that goes along with this is often seen as the transformation of insurance through reorganization. But this stops short of the real nature of the issue, which is rather that the business of insurance needs to be linked to logic and to the digital economy. It is a question of broadening the business. Due to the novelty of the relevant technology, this will bring many new opportunities for InsTech startups and established providers alike. Some key shared characteristics:
- Digital Economy: Ability to link services.
- Customer Journey: Seamless customer service both online and offline.
- Configuration: Modules linked flexibly with packages.
An issue affecting all providers, whatever their size, is how to secure the business model in the context of digital and physical integration. The established insurers have chosen firstly to expand their business more generally with a range of digitization services. InsTech, on the other hand, is better positioned to enhance specific services rather than overhauling the entire business.
Market positioning will be decisive: standard/direct insurer or premium-segment provider. Insurers that operate in the premium segment will also have to use digital solutions to broaden personalized advice, respond to individual customer requirements, and integrate this into the personalized advice process. Digitalization is therefore an evolution as well as a disruption, and both InsTech and established insurers face big challenges.
The market is shifting
These days, everyone is talking about the digital home, wearables, autonomous cars and so on. The market is waiting for appropriate solutions and offers and there are few end-to-end solutions to be seen today. Fundamental strategic questions remain for the insurance market in 2016. Focus groups indicate that the trends presenting the most exciting opportunities are:
Big Data and Analytics:
- Automated underwriting
- Customized product design
- Touch points and customer retention
- Customer satisfaction
- Sales quality – conduct risk & compliance
- Targeted marketing
- Transparent client/patient applications
Big data and analytics tools enable insurers not only to access enormous data sets, but also to link these with data from the net. This allows existing business to be expanded and new business models to be opened up. For instance, underwriting is being automated based on more empirical and more current data. Products can be designed on a more customized basis. Marketing is better targeted and more personalized. Relationships with customers are closer, and risk management and compliance requirements can be met more automatically.
The Internet of Things (IoT) – new challenges:
- Ad hoc pricing
- Wider opportunities for services and products
- New pricing models
- Insurance as a “product add-on”
- Improved risk management with the IoT
Thanks to sensors and the IoT, it is now possible to perform ad hoc pricing based on the customer’s location. Further developments and trends in the health sector will substantially change and broaden insurance business models.
Omnichannel is a must
- Using and linking all channels
- Expanding and professionalizing the point of sale
- Ensuring consistent customer experience through the principles of gamification
- Customer-oriented touch points
- 360-degree view for customers
- API economy and sales via and with digital partners (one-stop shop)
- Convenience, convenience, convenience
Omnichannel solutions have become absolutely indispensable. Customers can choose when and how to get in touch with insurers. This means all information has to be current and available on all channels at all times. The internet and personalized advice are not mutually exclusive; they have to be complementary.
Speed is everything
To meet this wide range of challenges requires correspondingly agile processes and methods, such as design thinking. Agility and speed are the most important qualities in the medium term for holding your own in a changing market. Even the best ideas amount to nothing if they spend months being written down and diluted in excessively long concept papers. Fast is better than perfect.
Successful insurers are already using their agility to create the right environment. Agility is key for both evolution and disruption. Insurance is finally putting the customer center stage. New offers, products, and business models are being developed for and with customers.
How to? Achieving your goals through agility
When it comes to digitalizing the insurance sector, we are playing to our strengths at ti&m. Gone are the days when agents worked with marketing and technicians worked with IT. As a digitalization partner, ti&m is equipped with a comprehensive skillset. We are focused on modern, successful, and agile project methods. Agile projects are closer to the customer and can react rapidly and flexibly to changing market needs. Our Innovation
Lab, ti&m garage, helps deliver completely new solutions that can be integrated into business and IT. With the ti&m garage approach, we can develop, test, and market-test ideas at reasonable cost within four to eight weeks.
In addition, we have developed the ti&m channel suite to provide integrated solutions for all of the challenges facing digitalized businesses. Here the focus is on orchestrating customer relationships. “Two-speed architecture” results in prompt and agile front-end transactions and stable and efficient back-end
Evolution or disruption: it’s a marathon, not a sprint
Whether you’re large or small, an InsTech or an established insurance heavyweight: if you make the shift to an agile, innovative organization, are open to an error-tolerant culture, can put aside existing systems and think from the outside in, you have the best chance of being a winner in the rapidly changing insurance market.
Every company that wants to seize the opportunities offered by digitalization will have to be prepared for a marathon, not a sprint. The deciding factor will be the pace that can be maintained – the individual, not absolute, amount of investment in the transformation – by individual businesses.
This article was originally published in the ti&m special 2016 titled "Total Digitalization - the Networking of Things". Download the complete magazine for free here.
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