It is now well established that over the last 12-18 months, “technology” is at the front and centre of every industry. In many ways, it is now easy to conclude that every business is a technology company.
For the insurance industry, it is now at a wonderful inflection point. On one hand, the demand for new insurance products is ever growing – from the traditional life and health insurance to insurance against natural disasters and cyber attacks. On the other hand, the industry is unable to keep up with the very same market potential and requires a disruptive change in technology in order to adapt faster than ever before – retaining customer loyalty and improving customer experience adds a third dimension to the already challenging landscape.
Let us now look at a real-life experience from the point of view of the customer. Recently, I visited a hospital to take a test related to my insurance application. I went through the process of signing the same set of forms that I had filled in several times before – personal particulars, recent illness, family history, and so forth.
It was also interesting that I was asked to visit the same hospital where I have undertaken several health check-ups in the past. Why is it not possible for the insurance company to retrieve my past records and save some time here? Why is it not possible to tie up with hospitals and be able to get my report whenever I gave my consent?
Everything seems to be very manual and the same process is repeated every time a visit is made. There are big data-driven cognitive solutions that not only are able pull information from past visits but also to provide product recommendations based on consumer trends and needs. Moreover, all the paper work can be electronically processed and help become environmental friendly.
Technology for customer loyalty and for penetrating emerging markets
In addition, for some non-life products such as travel or auto insurance, cover has become more commoditised and purchases are mainly driven by price and not value. Customer loyalty is reducing and switching from an insurer to the other is simple and easy. Insurers who are focused on commoditising products are underestimating the risks from more customer-centric competitors.
Technology will once again be the differentiator for insurers who embrace technology to enhance customer experience while selling a commoditised insurance product.
Technology can also be further used to penetrate emerging markets. For instance, with the increasing penetration of mobile users in developing countries, a telecommunications company acting as an agent to sell insurance products will soon become reality. New partnerships will be formed.
For example, in Singapore, the DBS Bank and Manulife Financial Asia recently entered a 15-year regional distribution agreement covering four mutually significant markets: Singapore, Hong Kong, China and Indonesia. The partnership combines the strength of both companies and comes into effect in January 2016. DBS’ base of six million customers will soon enjoy Manulife’s life and health insurance solutions through the bank’s extensive branch network and sales professionals as well as internet and mobile banking platforms.
What are the emerging challenges?
How does the insurance industry improve client experience using technology without losing the human touch? How does it offer more commoditised products with value without eroding client loyalty? And how can it still use technology to penetrate markets where customers are still not technology-savvy?
Insurance, by design is for an individual – a market of one if you can visualise so. This naturally leads to the byzantine requirement that every individual’s needs and emotions are unique – a family insurance has to be customised per individual family member. This behaviour impedes faster and sustainable growth at lower costs in the industry where many of us have faced the long waiting time for the insurance agents to return with a proposal.
The reality is that commoditising of insurance products is here to stay. Increasingly, more products can be purchased off the shelves and some even instantly. The traditional way of offering life and health insurance will soon be challenged. However, it does not mean commoditisation will create trade-offs in losing human touch or client experience. New mindsets and technology driven processes will have to take into account the human elements in this industry.
What do we need to do?
Technology has traditionally focused on process automation. We tend to map the current process to create a workflow. This, more so, happens because of legacy thinking – internal view of things, on how we behave today becomes the need for automation.
Imagine the future with digitisation - Technology will shift towards client experience, which is more an “outside in” view. The emergence of mobile and cloud computing is fast making every smart-phone a payment kiosk, an information store and even a personal vault.
“Insurance is sold” will be a thing of the past. “Insurance is bought” lies now and in the near future. These are the factors that determine the degree of how much insurance is bought:
Number of customer touch points
The accessibility of customer touch points will be one of the most important factors in the future. Traditional approach of speaking to an insurance agent will soon be a thing of the past. Bots and Cognitive computing will not only replace the underwriters and the agents but will offer more intuitive solutions that are deeply visceral about the client’s requirements. The future customer touch points will be available anytime anywhere.
Shorter processing through intelligent systems
The Internet of things means an impatient client who needs instantaneous outcomes, expects real time acceptance and approval. In order for business models to be agile, technology needs to be deployed to evaluate the risks of the purchase. A highly intelligent, machine-learning enabled decision-making system will be able to robotise the entire operation.
Use of business analytics tools to study customer purchases or claims patterns and the ability to prescribe additional products that suit the customers’ needs. For example, a variant to the current insurance can be derived with intelligence gathered with all the electronics inside the car – making it smarter and kind of pay by use. We can dynamically vary, depending on driving habits within a day, the fault of a given single part and the risk associated with it, the weather conditions for the week, etc. New possibilities open up as the same applies to health, life – similar to Bayesian principles, policies can be dynamically adjusted to new data points.
Ease of processing
Minimisation is the key. Insurance companies must strive to cut down unnecessary repetitive data entry when buying new products or making a claim and to partner banking institutions to create transparent funding and payment arrangements. This can be learned from other companies like Apple, where the client is fully integrated.
Confidentiality and personal data security
A major concern from customers is the worry that their personal data is made available. Systems need to continue strict safeguards on personal information. Regulatory requirements need to be considered strongly.
The insurance industry is a growth play for Asia. On 5 January 2015, The South China Morning Post reported that Munich Re, the world’s largest reinsurer by premium volume, mentioned that premium from the Chinese market grew by 25% year on year to EUR1.39 billion (US$1.56 billion)in 2013. China’s premiums were also expected to more than double until 2020.
There is a compelling need as the addressable market expands within emerging economies. A big rural population that is already on a mobile phone can be a big client base. This calls for singular focus on making the business models minimal while minimising the enterprise risk. And technology today opens that possibility.
It is also to be noted that any delay in self-disruption to simplify, or a conservative approach, is high risk – as the next insurance company may be a telecom or retail or a start-up, like what Amazon did to books and Apple to music.
Mr Koushik Radhakrishnan is Regional Director, Infrastructure Services – Asia, Middle East & Africa Region at CSC.