Digital insurers following the online business model use technology to offer more direct services, while branches are repositioned.

Last week, I looked at the tailor-made digital insurance model or archetype. This week, I’m honing in the Online model which, like the tailor-made, is focused on increasing profitability and customer retention—but through a customer relationship that is simple and efficient rather than deep.

Going direct - customer relationship vs strategic objectives
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In fact, this model is built on providing customers with a simple “no frills, no fuss” way to access products and services that serve their needs. The emphasis is on getting the transaction done as easily and agreeably as possible, a proposition that a growing proportion of customers (myself included) find attractive. Companies who do this well can build a loyal base of customers, and sell them more. One example is the way in which South Africa’s Outsurance has moved from car and household insurance, sold exclusively via its contact center, to life insurance, on the same model.

Unsurprisingly, online digital insurers tend to emphasize the better pricing they offer based on the use of technology, and also the speed of the transaction. They tend to pride themselves on the slickness of their processes, including superior claims performance.

For large multi-line insurers, setting up direct online units is a way to cater for customers to whom traditional physical channels no longer appeal. A recent example is MAPFRE’s acquisition of Direct Line’s businesses in Germany and Ital. Companies that develop an online business and also have an existing branch network tend to use the latter to serve specific market segments that value proximity and depth of advice—high-worth customers, and, increasingly, the underpenetrated and lucrative professional and small/ medium business markets.

Launching new online brands requires expertise and focus. Not all attempts have been successful.

One success story is Cosmos Direkt a German insurer—the country’s largest in the term-life sector. It offers a limited product range in this sector exclusively, and its growth is testimony to the potential of this business model. It has no field force. As one might imagine, its website and customer portal is notably easy to use.

Another example of successful online model is Netherlands-based Intrasurance. By contrast with Cosmos Direkt, it is a full-service broker and third-party administrator—but one that uses technology extremely intensively. In fact, one might also call it a technology company as well. This approach has enabled it to achieve very high levels of efficiency, and also to use cutting-edge analytics to gain a very detailed understanding of what customers want.

Next week, a look at the last of our four models, the Hybrid model, which is increasingly attractive to insurers willing to harness the power of digital technologies.

For more information, download our recent paper, Double the profits: How insurers can create business value from digital transformation. For more on the case for digital transformation, read the Accenture 2013 Consumer-Driven Innovation Survey. You might also find Four capabilities insurers need on the journey to digital mastery and high performance useful background reading.

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