Other parts of this series:
- Life insurers face huge digital disruption despite their cautious approach to new technology
- Stable revenues and complex product offerings put the brakes on digital transformation in life insurance
- Smart life carriers are looking to digital technology to meet new challenges
- Digital Transformers are reshaping life insurance distribution
Digital transformation is sweeping across the insurance industry throughout the world. Yet life insurers tend to trail their counterparts elsewhere in the industry in applying this technology. Why?
In my previous blog post I pointed out that providers of life insurance are just as committed to digital transformation as other insurers. Our recent Distribution and Agency Management Survey, for example, shows that life insurers have very similar expectations to their peers in other lines of business. They just have a longer horizon. It’s clear that these carriers recognize the potential and importance of digital transformation.
So why the delay? There are three main reasons.
- Firstly, many life insurers boast large numbers of long-term customers who provide them with strong and stable revenue streams. This tempers their need to secure new customers or establish additional markets. Servicing existing customers is a big priority for life insurers, according to our research. Increasing the wallet share of existing customers was identified as an important revenue driver for the next three years by 63 percent of life insurers. This is well ahead of P&C and multiline insurers.
- Secondly, the complexity of many life insurance offerings, especially annuities and other wealth management products, has deterred many life insurers from automating their sales and marketing activities. These products often require a lot of customer guidance, so agents and brokers remain an integral part of the sales process. Around 45 percent of the life insurers we surveyed assign customers to agents even when they’re buying products online.
- Finally, the complexity of the legacy systems built by life insurers, together with the wide variety of products and services they support, has deterred many carriers from embracing new digital platforms. The transition often appears overwhelming. Our research found that life insurers were cautious with regard to investments in digital technology intended to radically change markets and distribution channels.
These three obstacles are all substantial hurdles to digital transformation. However, they are only short-term barriers. Market forces are already undermining the first. Competition in the life business is on the up. Banks and investment funds are increasingly locking horns with life insurers in the quest for revenue growth. And rising customer attrition is forcing many carriers to more aggressively hunt for new business.
Moreover, rapid advances in technology, such as customer analytics and robotic automation, are helping insurers overcome the problems posed by product complexity. And the rise of a multitude of reliable “as-a-service” offerings is making the shift to digital platforms less daunting.
Far-sighted life insurers are recognizing the shifts taking place in the industry. They are looking to digital technology to help them adapt to new market conditions. Carriers slow to respond risk being left behind by their competitors. They’ll struggle to catch up.
In my next blog post I’ll discuss some of the business opportunities digital technology is creating for life insurers. In the meantime, have a look at our Distribution & Agency Management Survey. It contains lots of valuable insights: