I have been arguing that, for insurers, the key reason to become digital is the changing needs and expectations of consumers (and thus customers). In this blog, I’d like to spend a little time exploring the nature of the competitive terrain that the emergence of this new class of consumer is creating. The vital point to understand here is that the field of competitors has now widened beyond insurance.

The reasons behind this widening of the competitive field are complex but, in the end, easy to understand. One is that the digitization of the insurance value chain is, in many respects lowering the barriers to entry at many points along it. The emergence of aggregators is a good example of this. The insurance product is not a physical thing but it is well defined, making it a prime candidate for easy commoditization and digital distribution.

2013 Digital Insurance Survey: Insurers commit to digital transformation as a lever of high performance
Read the survey report.

For insurers, the danger here is not that they will disappear—creating these products is, after all, highly specialized and highly regulated—but that the relationship with the customer will pass to another company. I know that some insurers argue that the customer relationship is already owned by intermediaries like agents, brokers or distribution partners. But the entry of companies from outside the financial services industry is the mold-breaker, primarily because many of these companies understand much better than insurers or other members of the traditional insurance value chain how to maintain and leverage customer relationships.

In short, they are better placed first to understand what the Generation D customer wants, and then to deliver it.

Accenture’s recent Digital Insurance Survey showed quite clearly that insurers are alive to the challenge. In Europe, Latin America and Africa, 12 percent of life and 16 percent of property and casualty insurers indicated that such competitors were already active in their markets; a further 41 percent and 60 percent respectively said that they expected such competitors to emerge in the next three years. Read the survey report.

Respondents most cited Google as the most likely external competitor, followed by aggregators, brokers and e-commerce players like Amazon.

Next time, we’ll continue the discussion by considering what type of response insurers should be making.

One response:

  1. I couldn’t agree more, Thomas. Here in the UK there’s a clear and present danger that a digital insurgent will further disrupt the Personal Lines market. Google or one of the aggregators will surely look to move customers frictionlessly around the market year-on-year to guarantee the lowest price.

    Purchasing insurance is still far too complicated. Consumers have to check multiple aggregators and also go direct in order to get a menu of quotes. Often these aren’t comparable (different excesses & coverages). Policy wordings are full of jargon & legalese. Claims restitution is complex & lengthy.

    The net result of all this, I would argue, is profound mistrust of insurers. Net Promoter Scores are, on the whole, woefully low. Insurers who don’t grasp the urgency of the situation are going to be surprised by the swiftness of their expulsion from the customer relationship.

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