 Ian Bowen, Sales Director for UK and Republic of Ireland at The Innovation Group
After the rocky, disaster-strewn years of 2011 and 2012, many insurers are undoubtedly hoping 2013 to provide a much needed period of respite. Ideally they are looking for a year framed by low catastrophe occurrence, prudent underwriting and a reduction of the economic uncertainty that has been dogging key markets around the world.
However it has not been the easiest of starts to the year. Ripples from catastrophes such as Superstorm Sandy are still being felt by insurers as losses hit US$30bn and continue to climb. Elsewhere the UK and most European economies are still in recession, while both the US and APAC regions are seeing varying degrees of growth.
Low interest rates around the world have also hit insurers, cutting yields on the bonds and related securities that their investment portfolios tend to favour. This has forced some insurers to construct less generous policies, cut benefits and, in some situations, raise prices.
Coupled with these pressures are changing customer demands and an emerging suite of new distribution channels, both of which are driving insurers to constantly innovate in order to remain competitive. In particular, the growing loyalty issues between consumers and insurers are forcing the industry to reassess its approach to customer service. This has led to a continuous focus on improving underwriting and pricing, as well as constantly releasing new and updated products that focus on the changing demographics and expectations of an increasingly agile consumer base.
Probably the leading tool in the modern insurer’s arsenal in the fight to remain competitive, therefore, is technology. Those organisations that can successfully fuse market-leading ideas with innovative technology stand to win the most ground with consumers. This doesn’t just mean having a website optimised for mobile devices. This means building new solutions that directly and positively impact the customer journey from initial contact all the way through to policy renewal.
For example, in 2012 the number of smartphones in the world passed one billion. Yet insurers historically have been slow to embrace the mobile data revolution, and most insurance apps today fail to take advantage of the enormous potential of smart devices.
At the moment it isn’t easy to complete a mid-range insurance transaction online or via an app, but this is likely to change. The widespread adoption of HTML5 and increasingly affordable smartphones should prompt many insurers to invest in versatile and secure web apps or smartphone apps. Mobile is about user experience. It is about smart apps working across multiple devices and connecting with the back office.
Thankfully 2012 was the year when insurer app production finally started gathering pace. Aviva, for example, launched a particularly impressive app in the UK that monitors policy holder driving using technology included in most smartphones. Customers are then offered discounts for safer driving. In 2013 we can expect to see a raft of similar apps, all designed to engage the consumer and make the policy purchase and claims process as painless as possible.
Technology is also changing the way the insurance industry is thinking about data. Insurers have always generated vast amounts of data, and this has increased as newer technologies are adopted alongside traditional processes such as risk analysis and customer intelligence. As a result an incredible amount of value is currently locked up in huge insurer datasets. Any organisation that can successfully unlock the power of this data stands itself in good stead competitively in this crowded market.
It won’t necessarily mean acquiring more data, but instead making better sense of the existing data to gather new insights into consumer behaviours, attitudes and demographics. It’ll encompass many sources of data, both internal and external, using the petabytes of stored information to inform future underwriting decisions, claims models, customer analytics, business processes and more.
As with data, insurers have been somewhat slow to recognise the benefits of cloud computing compared to other industries. However, there are signs that this is changing and insurers are starting to recognise the value in these solutions compared to their legacy core system applications. For insurance companies, cloud computing comes down to infrastructure and the wealth of more sophisticated, robust, multi-tenant options offered by the cloud compared to traditional hosting.
Any new product innovation, whether app, mobile, data or cloud, must be grounded in a robust infrastructure and an unrelenting focus on customer service to maximise the consumer experience. The challenge for insurers will not be building the apps or using the data, but rather ensuring that the technology is compatible with legacy systems. Ultimately, speed to market and customer satisfaction are key for insurers.
There are also factors such as security, usability and scalability to consider. Any technology that is used for mass marketing insurance transactions must allow consumers to interact with businesses quickly, efficiently and securely. Such is the level of competition and consumer fickleness that even the smallest technological blip can lead to a breakdown in the customer relationship.
To succeed in the new world order of intense competition and economic uncertainty, insurers need to let go of their naturally conservative inclinations and embrace innovation. Success in the future depends on the adoption of new distribution channels, combined with a robust, agile suite of solutions that enables organisations to compete effectively and focus on delivering outstanding customer service.
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