Last time, I talked a little about the vanguard position UK insurers have taken in the digital revolution compared with our European colleagues. As I hinted, I don’t think this necessarily positions the local industry that well.
One might call it the “early-adopter syndrome”—or (more controversially) think about the dinosaurs. What I mean is that, by a cruel irony, it’s often the people or companies that spot the opportunity first who end up being disadvantaged down the track. In business, this often means that the early adopters are using immature technology and toolsets. More crucially, they are pretty much making it up as they go along, which means that the business processes relating to the innovation are unlikely to be integrated into the existing enterprise architecture.
In addition, it’s surprising how often the original opportunity is overtaken by circumstances—the opportunity remains or even grows, in other words, but morphs into something quite different. Thing designing and assembling a plane in mid-flight.
I’m generalising, of course, but I think it’s safe to say that many UK insurers find themselves in this sort of position. Here, what tended to happen was that the emergence of new channels translated into a direct sales model, often based on voice, and then in the drive to go direct, the new breed of aggregators pushed to remove excess complexity and made it easy to compare quotes and buy insurance.
This has made price one of the key factors in the UK insurance market, as the research confirms (see my previous blog).
Now, however, it is becoming clear that the game is shifting. Customers are becoming much more demanding, and their expectations are being set by companies in other sectors. In fact, digital channels are being seen by customers as an entry-point into a wholly new type of experience: customised, personalised, context-relevant. Price-sensitivity, however, isn’t going away.
Distribution and supply chain models are being re-invented. New partners have emerged and will continue to evolve. The role of existing players is changing and has to be carefully re-thought. Insurers need to be clear on the value added to customers by each party in this new world, an assessment that could change roles and require non-traditional approaches that threaten existing operations.
This is the big new challenge facing insurers, and the reason for their continuing investment in digital technologies. I worry that UK insurers have simply been battered by too much change already, and they haven’t yet realised the extent of the potential disruption inherent in the digital revolution. My experience tells me that many digital projects are still focused on optimising existing processes or channels, and not on the more fundamental, customer-led, transformation that’s probably going to be needed to survive and prosper.
In short, then, have the advanced, pace-setters of the last decade become the dinosaurs of the emerging age, ready for extinction? I’ll follow this line of thought in my next blog.