As I indicated last week, the focus on digital transformation is driven by the size of the prize on offer. I cited changing customer behaviour and heightened competition as two specific challenges. Overcoming both of these challenges, if you think about it, requires insurers to become customer-centric.
This move will in turn entail moving from a product to a solution focus.
It should thus be no surprise that one of our key findings is that, when it comes to digital transformation, insurers’ top priority is developing a customer-centric distribution model. Top strategic priorities include multi- and cross-channel interaction (62 percent), growing digital relationships with end customers across all distribution channels (58 percent), and operational simplicity and efficiency (54 percent). Taken together, they all mean one thing: a clear understanding that an unwavering focus on the customer is vital.
Top-priority initiatives confirm this increased focus on customer-centricity. Expanding client view (59%), simplifying processes (57%), developing digital processes (56%) and personalizing the customer experience (47%).
Another key finding is that digital transformation has an important role to play in streamlining administration to reduce costs and optimize the channel mix. It’s a drive to create greater efficiency at a time when competition is expected to intensify, often from outside the industry, as already noted. Google, aggregators and Amazon are the most frequently mentioned in this context. This extra-insurance competition has the capability to seize ownership of the customer relationship, relegating pure insurance companies to the back room, manufacturing products at the behest of their new masters. Digital insurers will be better positioned to maintain their place in the value chain, but they will need to be innovative to compete with these companies successfully to retain their own client relationships and, with them, the opportunity for growth.
Forty percent of respondents expect competition that is much more intense, while a further 49 percent expect it to be slightly more intense. In other words, only 11 percent expect competition levels to remain stable or to ease.
Part of the rationale for optimizing the channel mix and integrating physical and digital channels is to provide the seamless customer experience that is now required. Key initiatives to make this become a reality are to align product and service offering cross-channels (86% currently developing, planned or in discussion), to develop simplified products for cross-channels sales (86%) and to provide device enablement to physical sales channels (82%).
Next week, I’ll continue to share some of the research’s key findings.