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Digital Insurance: What, Why, and How

‘Digital insurance’ is a hot topic within the P&C community. At a high level, consultants and practitioners can rapidly agree on the importance of ‘digitalization’. However, when we start developing and implementing a business case, definitions of the strategies and tasks get a bit murky. Two recent articles help focus on critical criteria.

Why do Digital Insurance?

At present, there are relatively few insurers with extensive digital experience. Some practitioners choose to learn digital on the fly. This can quickly become a swamp, as ‘digital’ encompasses a large variety of technologies, some of which require long time-frames in order to produce results.

A recent posting on the Bain & Company site lays out clear guidelines with two questions:

  • What is the time frame for realizing benefits?
  • What is the business case for Digital Insurance?

But there is one critical question: Who is the judge?

For Bain, the consumer is the judge and jury. Requirements set by internal departments – underwriting, claims, risk management, etc. – must learn this hierarchy.

Working with Google, Bain identified seven technologies which are “in production and have demonstrated the capability of disrupting the industry by bringing the consumer “more choice, better service and lower prices”:

  • infrastructure and productivity,
  • online sales technologies,
  • advanced analytics,
  • machine learning,
  • the Internet of Things,
  • distributed ledger,
  • and virtual reality.

With this context, Bain and Google created a prototype P&C German insurer and analyzed the impact on the insurance consumer.

The partners found that “these technologies could increase its revenues by up to 28% within five years, reduce claims payouts by as much 19% and cut policy administration costs by as much as 72%.”

What makes us think this works?

There are a number of critical assumptions in the Bain/Google model. Fortunately, the critical success factors reflect pure common sense.

Bain provides several criteria.  Here are two:

(1.) The model is consumer-driven

Bain writes:

“Digitalization is not an end in itself, nor is it primarily a means of increasing profitability. Rather, it is a way to serve evolving and demanding customers. Design digital use cases that improve the customer’s experience and add value. Profits will follow.”

(2.) Internal actions must be driven by the external

Bain advises:

“Rapidly evolving technologies and customer behavior present a challenge to long-term planning. Insurers should quickly bring new prototypes to market and continue to improve them. Companies should abandon those tools that don’t improve the customer experience, help cut costs or give them an edge over their rivals.”

Bain is not alone …

The leader of a Canadian technology supplier weighed in on the same issues, with a practical bent for smaller insurers.

Writing in PropertyCasualty360, Tara Kelly, founder, president & CEO of SPLICE Software notes: “From an insurance industry perspective, some of the most exciting developments are those that are changing the way insurers interact with their customers.”

Kelly goes on to recommend 3 tactics to improve the interaction.

(1.) Data-driven personalization

Kelly notes that most insurers do not have data stored in a manner to use for personalized communication.   Many don’t believe that a data scrubbing exercise is worthwhile.

Wrong:  Kelly cites a recent Forrester study which found that a 40 percent increase in customer satisfaction from personalized, proactive communication as well as a spike in the Net Promoter Score (NPS) of companies that use personalized outreach.

(2.) Insurers continue to find new roles for data

Once an insurer learns the value of data in personalization, it can take the construct to other areas and develop new relationships with new consumers. Examples include telematics/UBI and smart home technology.

(3.) The micro-moment becomes the battleground for brands

As insurers learn the value of data, they can implement technologies which better serve the consumer. Kelly writes, “owning the micro-moment requires an omnichannel strategy. For example, the ability to respond to a quote request via an automated voice or text message or deliver a notice to a mobile phone when a claim is processed can be important assets in the battle to win the micro-moment.”

Things are going to slide… 

Bain shows that new measures are required to be used in developing, testing, and implementing new technologies. Kelly demonstrates how the customer focus can facilitate these implementations.

These may not fit previous critical success factors (CSFs) If so, there is a decision: Do we stick to the past rules or do we change the game?

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