It has long been accepted wisdom in the insurance industry that by improving the accessibility and efficiency of cumbersome processes, customers will realise what they have been missing and flock to buy bucket loads of insurance.
There is undoubtedly a pressing need for applying the latest technology to re-engineer customer-facing insurance processes. However, the volume challenges being faced by digital direct-to-consumer insurers would appear to indicate that process improvement is necessary, but not sufficient, to move the dial on consumer perceptions significantly.
Value is in the eye of the beholder
Indeed, the value of the core insurance proposition remains nebulous in most customers’ eyes. The peace of mind that is intended to be provided is undermined by a media and regulator narrative that focuses on the negative. Good news stories about the valuable contribution insurance makes to the stability of the financial system overall, and individuals’ lives in particular, do not sell media subscriptions. Most customers’ lived experience of insurance is money out every month and nothing back. Ever.
Delivering tangible value to all policyholders, not just those who claim, has long been the conundrum faced by insurers. But there is a glimmer of light rising in the east. Asia has long set the pace in financial services innovation. Hundreds of millions of consumers in the region have embraced digital payment platforms, online lenders and other forms of Fintech, seeding formidable competitors to traditional banks. These services are predominantly accessed through ‘super apps’, threatening to up-end the whole banking sector. And where banking leads, insurance often follows.
Behind every threat lies an opportunity
While often regarded as a threat, the rise of super apps offers insurers the potential to revolutionise their offering and at long last deliver the holy grail of tangible value to all policyholders. Super apps offer a single access point to a wide range of digital products and services – messaging, social media, marketplaces and services. Using super app technology to offer customers access to a relevant and attractive suite of virtual offerings in addition to the underlying financial product, could transform consumer perceptions (and generate new revenue streams).
While consumers may not be overtly demanding super apps, the success of WeChat, Go-Jek and Grab certainly indicates that they value the convenience and accessibility that such platforms provide. Instead of having multiple apps for various services, they are now looking for just one. The actionable data that customer interactions with such a digital ecosystem provide would allow insurers to design and target suitable products for their customers better. This allows insurers to build trust in their brand, access new customers and future proof their business. The flow-through to brand reputation is clear.
The future is owned by those who prepare
The strength of the network effect means that first-mover advantage is large and sustainable. What should insurers be doing to capture this value?
Primarily, they will need to decide very soon the role they envisage playing. Do they want to be front and centre, designing and orchestrating the ecosystem? Or are they happy operating in the background, limiting their participation to provision of capital and regulatory permissions? Regardless, they will then need to start investing and evolving towards achieving that vision.
There are thre main factors for executives to consider:
- The world is moving towards open data and APIs. Privacy may be an issue to resolve but this will not prevent progress. Insurers need to update their infrastructure to participate in the opportunities presented by this phenomenon. But they also need to change their cultures to be more open.
- Leveraging the available data requires an investment in data management and analytics capability. Insurers have already made great strides in this area, but further development of talent and infrastructure will needed to truly realise the potential of this significant opportunity.
- Developing a compelling digital insurance ecosystem involves structuring meaningful partnerships with industry leaders in various sectors. These partnerships include not only participants in the digital ecosystem itself, but technology providers who enable customer access and utilisation.
Once the target vision is clear, insurers can enable ecosystems by creating organisational foundations and the technological basis. There is a clear need to assemble cross-functional teams in agile organisations and to react quickly to developments in the market and customer preferences.
On the technology side, what is required is a modular platform that digitises core insurance processes while at the same time allowing dynamic access to the services and products within the ecosystem. There are a number of tech players who already have the platforms to enable insurers to start the journey in a low-risk manner.
A true life partner
Getting it right means that the insurer’s super app becomes an integral part of a policyholder’s life, delivering true tangible value that has eluded insurers for all of history. This is clearly not going to happen overnight, but for ambitious insurers with a clear medium-term vision, now is the time to be setting up the foundations. As we have seen with the mega players, successful super apps have evolved over time by truly understanding their users’ needs and delivering on them. This can only be achieved by truly engaging with them.
As with all things, timing is critical. Different players from various industries are already collaborating. Ecosystems are showing real traction and will become a huge differentiator over time. The trend among consumers and businesses is towards super apps. The big question is whether insurers will be well placed in a world dominated by super apps. A
Mr Sean Rowley is commercial director at ManageMy.