The reluctance of South Africa’s short-term insurance providers to adopt digital innovation could cost millions in lost Gross Written Premiums (GWP) revenue. In fact, the GWP is estimated to reach R115.2 billion by 2020. A recent Accenture survey that focused on the short-term insurance sector shows that nearly 80 percent of 1,500 insurance customers surveyed across South Africa are ready to purchase insurance products online, confirming there is a clear customer preference for digital insurance solutions and readiness for digital engagement.
In order to become insurance providers of choice, short-term insurers should harness the power of digital technologies and create their business models around changing customer preferences. To capitalise on this digital opportunity, insurers need to do more than simply include digital as an additional channel of distribution. They need to fully embed digital into their systems and processes, in addition to dealing with key customer challenges, such as lack of trust and failure to meet service quality expectations.
The R115.2 billion GWP opportunity is within reach for South Africa’s short-term insurance providers if they effectively digitise their systems and apply essential strategies to address customer concerns and re-energise customer relationships. We have identified the five key strategic imperatives that will help short-term insurance providers meet evolving customer demands and create a foundation for participation in a fully digitalised business environment.
1. Be smart
There is high awareness of digital offerings such as telematics, but usage is very low. Smart solutions such as connected homes, wearables, nearables and tracking algorithms, can present insurers with significant advantages. Telematics is a great example of a smart solution that can lower risk and costs for both the insurer and the customer.
Awareness of telematics is fairly high among South African insurance customers (41 percent), especially when compared to UK customers (38 percent), but uptake is low. Only 16 percent are using telematics, and despite the benefits offered, only a tenth of respondents are certain they will switch to an insurer that offers this product. While the majority of customers say they may be incentivised to try telematics if it meant lower premiums, almost 60 percent say they are concerned that insurance companies will use the information to increase premiums or avoid paying claims.
2. Be accessible
Customers are multichannel users who expect insurance providers to be accessible through the channels of their choice. Insurers that go digital, utilising a multichannel strategy, will position themselves well to meet customers’ needs. This is imperative as the Accenture survey results show that only 20 percent of insurance customers feel their insurance providers are easy and convenient to deal with. In fact, across the 13 industry segments included in the survey, insurance companies ranked in sixth position, behind retailers, banks and car dealers, in terms of customer ease of interaction and convenience.
Younger insurance customers show a preference for digital channels while older and middle-aged customers want to interact via multiple channels, with the human element playing a pivotal role in interactions. While telephone conversations remain the dominant method of interacting with insurance providers, customers are slowly shifting to digital channels.
3. Be trusted
Trust and transparency are major concerns for insurance customers and should be given strong focus. Asked about the sharing of data, customers made it clear they are aware of the vulnerability of their data. They also recognise that using digital services inevitably increases their exposure to unwanted outcomes, such as identity theft. In general, customers are not comfortable sharing even basic personal contact information which most insurance companies already have on file.
Digital trust is the currency of the digital age. Without access to data, insurers will not be able to directly and accurately target their offerings to customers. To secure digital trust, data management and ethics must be a core strategy for insurers. New products, services and innovations must be ethical and secure by design. This will improve customers’ confidence in sharing personal data and completing transactions online.
4. Be responsive
Despite high levels of customer satisfaction, more than a third of insurance customers will switch to a new provider for the right price or benefits. Fifty-three percent of customers surveyed say they have been with the same insurer for less than three years, and more than a third report recently switching providers. Forty percent of repeat customers consciously renew their policies, motivated by customer service and price satisfaction, while another third stay with their provider out of habit or as a result of automatic renewal of their policy.
To minimise churn and drive loyalty, insurers need to become more aware of customer needs and be more responsive, delivering solutions that are more relevant and tailored to individual needs. Insurers should address three key areas in which they are failing to meet customer expectations: efficiency of claims services, provision of value-for-money offerings, and the ability to let customers manage their policies in ways that suit them.
5. Be relevant
Customers want personalised products and services that directly address their needs. The survey made it clear that customers in different age groups find different products relevant and attractive to them. For insurers to retain and grow market share, it will be important to understand these needs and present customers with tailored solutions via their preferred channels.
To do so they will need greater access to personal customer data and partner networks. More than half of customers surveyed are interested in value-added services such as location-based deals and regular services. These customers are ready to part with more personal information for the right offers and incentives.
To become insurance providers of choice, South African short-term insurers should harness the power of digital technologies to re-conceptualise their business models around the customer. Through a combination of information, business resources, digital technologies and innovative strategies, they can create unique customer experiences that will help them to grow.