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Does the Digital Direction Have a Devolutionary Detour?

Last week, at the 2015 Insurance-Canada.ca Technology Conference, Kimberly Harris-Ferrante, Vice President and Distinguished Analyst at Gartner said that at present, Canadian consumers are not being easily swayed toward the new digital insurance landscape.

At the Davos Economic Forum this past January, Google’s Executive Chairman, Eric Schmidt quipped that in the not-too-distant future, the Internet will ‘disappear’.

Taken together, these two observations have significant implications for Canadian insurers and brokers. We’d like your opinion.

Insurance practitioners’ challenge – What do consumers want now?

Harris-Ferrante began her presentation by noting that insurers are being drawn to digital solutions because of the promise of transformational results.  The key to success, Harris-Ferrante contends, is the intelligent management of the transformation.

The popular press suggests that consumers are in the lead on digital transformation, and are moving away from the traditional methods of insurance acquisition and servicing.  But beyond the rhetoric, what are customers doing?

Actions speak louder than digits…

According to Harris-Ferrante, a recent Gartner survey found that Canadian insurance customers are maintaining traditional behaviour.  In spite of heavy marketing/advertising, on-line acquisition rates remain low for personal automobile (13% indicated they would buy from this channel), and use of bricks and mortar intermediaries remains strong.

When asked about interest in trying digital channels, a high proportion of consumers are satisfied with their current insurer (59%), with call centre service (61%), and with insurer communications (64%).   The one major challenge consumers have is understanding insurance terminology; only 27% felt comfortable.

The common wisdom that younger demographics are moving towards digital options faster was not supported by the survey data.  The results were consistent across all segments.

Will the circle be unbroken?

This is not to say that insurers should back off adopting digital tools and innovative processes.  Harris-Ferrante noted that insurers are driven by three competing factors, one of which is the consumer preference.  The others are:

  • Operational – expense reduction, improved business results, optimized business practices;
  • Product – tailored offerings optimizing coverage and pricing, reduced friction in delivery, and improved efficacy in claims servicing

Digital supports improvements in these areas, Harris-Ferrante suggested and, should continue.  As we have seen in Canada with banks, consumers will be driven to self-service with  carrots and sticks.

The point, according to Harris-Ferrante, is that insurers and brokers must be prepared to support traditional and digital strategies for some foreseeable future.

How long is ‘foreseeable’?

When Schmidt said that the Internet would ‘disappear’, he meant that it will become a utility like electricity, or water, or sewage.  What is required is required is a consolidation of functions so that ‘logging on’ will become passé.

“It will be part of your presence all the time. Imagine you walk into a room, and the room is dynamic. And with your permission and all of that, you are interacting with the things going on in the room,” Schmidt said.

This assumes standards – including security – being adopted by range of vendors and businesses, education developed and conducted, trading agreements established, etc.  At some point in this process, there will be a tipping point, and consumers, insurers, and brokers will find themselves racing downhill to the digital nirvana we now envision.

It’s time for parallel processing…..

For insurers and brokers looking to the future, there seems to be little choice other than to maintain a coordinated two-pronged strategy:

  • Continue to develop, implement, and integrate digital strategies that will  meet specific needs in anticipation of the new, fully-digital world.  These could be within the current business environment, or as a separate entity, insulated from the traditional business model.
  • Maintain existing business processes and implement process improvement initiatives (e.g.,LEAN, Core Modernization) where possible.  This will provide infrastructure that will support existing customers in an effective and efficient manner.

There will be duplication of effort between the two approaches, which will demand continuous monitoring at the senior executive level to ensure the separate paths can meet gracefully at some point.

What do you think?

Are you on a digital path that has hit some analogue challenges?  Are you postponing digital projects and suffering from a chorus of abuse for living in the past?  Have you found your happy place between the two and care to share your secret?

Let us know.

2 Comments

Wendy Watson

Seems like the brokers on my panel at the ICTC are singing from the same book! They are continuing along the traditional path of acquiring and servicing customer AND stepping into the digital world, recognizing one size does not fit all. I think Kimberly has it right.

Reply
HRAIO

It seems to me that most customers can be overwhelmed by the complexity of insurance. So even though they may be able to shop online, very few do. However, this makes a great opportunity for connecting people with a live broker that can answer their questions and make recommendations.

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