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Digitisation in insurance: What does it really mean?

Source: Asia Insurance Review | Apr 2015

Traditional insurance channels are currently being challenged by digitally-literate insurers who can readily entice and chat up your customers with electronic smiles and targeted messaging for their price competitive commoditised products. 
Mr Toby Rotstein of Innovation Group asks if an insurer can afford to be complacent and sit on the side-lines, watching its customers get chatted up by these smooth-talking digitally-literate insurer flirts.
 
Historically, insurance has always been socially savvy. It began with “friendly societies” where people contributed money into a pool that could be used for emergencies. This has since evolved into today’s modern insurance industry. As a business based on selling promises, the insurance industry has heavily relied on its social awareness and its ability to communicate. 
 
From a London coffee house in the 1860’s set up by Edward Lloyd (founder of Lloyd’s of London) as a popular haunt for ship owners, merchants and ships’ captains to provide a source of the latest shipping news, to today’s modern sophisticated market, the industry has and always will remain heavily reliant on its socially savvy channels of communication. 
 
The same remains true for the Asian insurance industry which began in the 18th century along with European colonisation and a need to protect the ever growing spice trade. Mimicking other insurance markets, the Asian insurance industry was built upon the then best available mode of communication, a socially aware network of capable brokers and agents. Even today, this remains the largest distribution channel in the Asian insurance industry.
 
Digitisation rules
However many insurers and their agents only engage sporadically with their clients today. Typically it is once a year around the renewal date via a piece of paper or worse, when clients suffer claims. As a result, insurers become increasingly exposed to losing their client base to the charms of digitally-literate competitors.
 
Is it still a sensible strategy for insurers to rely on client loyalty in an omni-channel environment, where consumers are more switched on and sophisticated in today’s digitally-aware world? 
 
What these advances in technology, and more specifically the internet, mean is that the world’s traditional modes of communications, such as ink on paper, have been superseded with electronic digits in a data format called digitisation.
The impact of digitisation on our lives is enormous. With most elements in our lives being available in digital format, digitally savvy companies can readily identify and analyse everything about their consumers from their buying habits, investment risk appetite, to even their preferred toothpaste flavour. 
 
In today’s world knowledge means power, so those who do not embrace a digitisation strategy now will, unfortunately, be left behind.
 
Digitisation in insurance
If success in the insurance industry is dependent upon insurers’ ability to communicate with their customers in a socially aware and caring manner, then insurers need to not only improve their current modes of communication with customers, but also consider expanding their channels to include more direct means electronically.
 
When I refer to an insurer’s customer, I do not just mean the policy holder. 
 
A digitally literate insurer can readily enhance the experience and improve the efficiency and relationship with all its key customers, en mass, employing user friendly, yet sophisticated, digital connections. Specifically, this can be accommodated via persona based portals for such key insurance customers as agents, policy holders, brokers, claimants, assessors, repairers and other such service providers. 
 
The digitally connected customers 
In Australia, domestic insurance is commonly sold directly and digitally via the internet. 
 
Consumers either view a consolidator’s website to compare participating insurers’ product features and prices, or go directly to a specific insurer’s website where they can select their preferred level of service and/or coverage and even negotiate the associated premium by varying factors such as the deductible amount by themselves, all online. 
 
Once payment is made, typically from an array of electronic options including credit card and electronic funds transfer, the policy is issued with immediate cover and the associated documentation issued via email. This involves no people, no commission, no invoices, no collection, no mail house, all done at little cost. 
 
Adoption of low cost direct distribution channels, especially when compared to going through agencies with the consideration of agents’ commission, is becoming increasingly popular in Asia. For example, DirectAsia.com has already successfully picked up approximately 5% of the lucrative Singapore motor-vehicle market in only three years and has already expanded its operations into Malaysia with similar results and recently into Thailand.
 
Portals
As mentioned earlier, insurers need to be digitally connected to their other critical customers such as intermediaries. 
Typically an insurer’s agency force numbers are in the thousands, which means access and communication become more efficient and cost effective when conducted digitally. Insurers need to engage with their agents or brokers on a regular basis to not only provide them with current product information and related benefits of ever changing product suites, but also access to tools that can generate quotes, issue policies and even monitor claims. 
 
Whilst some insurers have provided their intermediaries with stand-alone hand-held devices such as iPads, each with their own replicated premium calculators and logic, the current trend is for insurers to manage their agency force via an agent portal.
 
With an agents’ portal, an insurer can not only provide its agency force access to a common premium calculator but also access to other information such as their commission earned and payment dates. Agents’ portals can also be the media platform for insurers to socially communicate and interact with their agency force, making them aware of their insurer’s social and community activities and services. These portals can be securely accessed via the internet across a range of mobile devices, including laptops, tablets and smart phones.
 
Other key insurance customer portals include personas such as a claimant with online First Notification Of Loss (FNOL) as well as a range of service providers such as repairers, assessors and suppliers.
 
Adoption of digitisation in other insurance markets
Already today, through digitisation, medical insurers in Australia can register, approve and pay hospital and medical claims online by simply swiping an insured’s medical insurance card at the point of sale.
 
If we look over our shoulders at the European experience, according to ACORD, 60% of insurers lack a digital transformation strategy while only 13% have totally integrated digital into their offerings. This is a grave cause for concern if you consider that insurance sold through digital channels is expected to reach EUR25 billion (US$28 billion) annually in Europe alone as soon as 2016.
 
What can you do about it?
As you know the business landscape of the Asian insurance industry keeps evolving especially with the need to introduce more competitive, sophisticated products and expand distribution channels to include direct insurance, whilst at the same time enhance the customer experience, support significant growth, reduce cost ratios and improve profitability. To do this successfully an insurer is heavily dependent upon their capabilities and are subject to the limitations of its software platform.
 
According to Celent, about 20% of insurers in APAC are already working on their digital transformation and another 20% are strongly considering it. Also, of the $11 billion insurance IT spend in APAC, approximately 40-50% will be spent on implementing replacement core systems that are better suited to support digitisation and 5-10% on bolt-on internet front-end technology.
 
At Innovation Group, a global supplier of insurance solutions and services, we have invested more than $80 million to deliver an award-winning “future ready” core insurance application suite.
 
Innovation Insurer, winner of the XCelent 2014 APAC award for functionality, is a modern, field proven, intelligent insurance solution designed to leverage current technology to not only provide world class comprehensive end to end policy and claims administration functionality “out of the box” but also provide such advanced features as integrated analytics and the rollout of secured persona based portals (agents, brokers, direct customer, claimants, service providers etc).
 
Mr Toby Rotstein is General Manager, Sales, Asia Pacific at Innovation Group.
 
For more information please contact us at techsales@au.innovation-group.com.
 

 

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Recent Comments

Mark Anthony Nathan

Granted digitization is way forward but as risk carriers we need to be mindful that such strategy would be dependent on sales generated. If this continues to be less significant as opposed to other sales channels, carriers will not invest hugely until there are such real and emerging trends in Asia.

07 April 2015