We are hearing lots of enthusiasm for digital innovation by senior executives in insurance companies. And for good reasons. However, there may be some historical baggage that needs to be handled and some organizational issues that need to be addressed before progressing in the brave, new digital world.
What do you think?
The digital chain saw has insurance in its path…
An Accenture report, From Digital Wallflower to Digital Disrupter, notes that there are significant disruptive influences within and outside the traditional insurance industry that will force change. Research by Accenture found that “67 percent of insurance customers would consider purchasing insurance products from organizations other than insurers, including 23 percent who would consider buying from online service providers such as Google and Amazon.”
The authors use the term ‘sobering’ to describe the impact on insurers. ‘Scary’ is another term that could fit.
Additionally, the report opines that there will be pressures from alternative risk financing options that could take premium dollars out of the standard market. The example cited is the advent of the self-driving vehicle, which might come with an ‘extended warranty’ that could replace some or all of the need for standard insurance coverage.
We have blogged on this possibility for some time now (see, e.g., What’s the Lifespan of Insuring Telematically?) The topic will also be addressed in October at the Insurance-Canada Executive Forum 2014.
But the saw can cut two ways …
The Accenture report notes that this disruption brings opportunities for insurers: “With their deep resources, robust balance sheets, enormous scale, stockpiles of data and process discipline, insurers are primed to take a leading role in new ecosystems that connect customers to a range of products, services and vendors.”
The report makes specific recommendations for insurers, including:
- Positioning themselves at the heart of the digital customer experience
- Adopting collaborative technologies to develop a more flexible workforcs
- Using data as a core product to drive ROI
- Master Big Data using innovations in hardware
- Providing smaller, useful apps to consumers
- Ensuring nonstop business processes, services, and applications
But time is of the essence. The report concludes:
“The choice for most insurance carriers is this: transform yourself into a risk manager, advisor and value aggregator at the center of a digital ecosystem that delivers high-value services to customers every day, or risk being pushed to the periphery as an interchangeable, commodity-service provider with limited control over your destiny.”
The head is ready, but is the body willing?
A recent McKinsey research note, “The Digital Tipping Point”, makes similar points in respect to the business world generally. In our view, these findings apply to the insurance community. Senior executives see the need to go digital in order to grow. And CEOs and COOs are becoming directly involved in developing strategies and action plans.
Expectations are high in the C-Suite. And the officers are prepared to spend on engagement. But not so much on automation. “Just 34 percent of executives say it’s a top-three priority for their companies, even though automation may significantly help businesses in sectors that are undergoing digital disruption (by lowering customer transaction costs, for example) and improve their bottom lines.”
This attitude also found in human resource allocation. McKinsey notes: “Only one-third of respondents say at least one in ten of their employees spends any time working on digital projects.”
Further, there is no clear alignment plan: “less than 40 percent of executives say their companies have accountability measures in place for their digital objectives, either through measurable targets, performance incentives for relevant employees, or an executive ‘owner’ of their digital programs.”
What we need to do is …
McKinsey recommends that organizations need to take two steps:
- Understand the value that digital can create and ensure that the investments are aligned with highest value initiatives.
- Focus organizationally “to ensure that their structures and business processes are set up to take full advantage of the opportunities that digital efforts offer.”
We see a few insurers taking these steps, but not as many as required.
What do you think?
Are insurers (and brokers) ready for the new digital world? Can we continue to promote innovation without the necessary financial and organizational support?
We’d be interested in your thoughts, and any case studies you might be aware of that would illustrate how digital objectives can be achieved.