Fintech’s pervasive in banking and capital markets – as a competitive force and a source of collaborative opportunity. Now the same trend’s playing out in the insurance sector. In 2014, tech companies targeting insurance (InsurTech) received less than US$800 million in funding. Just a year later they attracted three times that amount. This new dynamic threatens established industry players that are, in the main, still tied to business models based on pooling risk, calculating average pricing and generating gross premium income.
Disruptive ‘insurtechs’ are using digital technologies like wearables, smart objects and connected cars to transform the traditional insurance landscape. In parallel, the ‘GAFAAs’ (Google, Apple, Facebook, Amazon and Alibaba) are having a profound impact. These digital-born behemoths, and others like them, are adept at leveraging data to offer personalised services. In the process, they’re fundamentally resetting the benchmark for customer experience.
‘Liquid expectations’ are a defining trend right now. Customers measure the quality of services they receive from one sector against their experience in another. Google can provide a fully integrated customer experience, with a single log-in, across myriad devices and products, at no charge. So why can’t insurers?
That’s not the only challenge. Accenture’s UK Financial Services Customer Survey 2016 shows that only 20% of consumers consider insurance companies to be trustworthy. The figure’s even lower for insurance brokers and IFAs, at just 17%. So what’s going wrong and what can insurers do to remedy the situation?
To promote trust and build deeper relationships, insurers need to learn from the GAFAAs: understand what customers want, and get better at providing it. Our research clearly shows that, throughout financial services, customers are clamouring for relevant products, seamlessly delivered across digital and physical channels. Digital’s not a replacement for face-to-face interaction. If people are making long-term financial decisions, they want a human face to advise them at the end of the process.
Product consolidation and simplification is another priority. We found that 37% of consumers would consider using a life insurer that could cover all their life insurance and retirement needs through one simple policy. When it comes to focusing technology investment, it pays to understand which segments are most open to digital interaction. The prime candidates are customers who hold a sophisticated blend of financial products. They’re more engaged and much more digital. The bad news? They’re also harder to please and less loyal.
Looking ahead, the priority must be to understand how to create and deliver customised products for core market segments. Access to customer data will be essential. So will be the advanced analytics capabilities that can drive insights from that information. As they drive towards securing these capabilities, firms will stop viewing insurtechs purely in terms of the competitive threat they pose. Collaborations with these new players will be key to achieving relevance in the new digital marketplace.