Covid-19 accelerates insurance digitalisation to meet customer demand
Insurers must explore new ways to build capabilities to meet the digital needs of customers as bigtechs and non-traditional players enter the insurance space, according to the World InsurTech Report 2020 (WITR) published by Capgemini and Efma.
With Covid-19 increasing customer engagement and expectations, the World InsurTech Report 2020 outlines a growing opportunity for InsurTechs, as insurers focus on their digitalisation efforts. As BigTechs make their presence felt in insurance, the boundaries between insurance, insurtechs, bigtechs, and tech partners are blurring. Insurers need to improve on high-impact focus areas including customer centricity, intelligent processes, product agility and an open ecosystem to remain competitive.
“Insurers have to look beyond other insurance companies as their competitors, and instead include BigTechs and other new non-traditional players, which are often offering a superior customer experience,” says Anirban Bose, CEO of Capgemini’s Financial Services Strategic Business Unit and Member of the Group Executive Board. “Forming scalable relationships with InsurTechs will help insurers digitise faster and more efficiently, deepening their customer relationships and helping them to fend off these new entrants.”
“Insurers need to become more customer-centric in everything they do,” says John Berry, CEO of Efma. “InsurTechs’ maturity and willingness to collaborate to bring new technology solutions to insurers are accelerating, aiding insurers to meet rising customer expectations.”
Covid-19 impacted sub-sectors of the insurance market in different ways as life and health experienced a hike in claims, while travel and auto felt a decline. However, all insurance providers have felt changes in how their customers engaged with them. Even with over 90 per cent of incumbents fully able now to conduct business remotely, they felt the Covid-19 impact on their new customer acquisition and retention. Some 61 per cent of insurers in July vs. 57 per cent in April believed Covid-19 impacted new customer acquisition, and 42 per cent of insurers in July vs. 29 per cent in April believed it impacted customer retention.
Covid-19 is not the only threat to customer acquisition and retention. BigTechs have raised the bar for customer experience and trust during the pandemic, providing consumers with crisis-proofed processes, real-time responses, and intuitive customer care. Policyholders’ willingness to purchase insurance from BigTechs has increased from 17 per cent in 2016 to 36 per cent in January 2020 to 44 per cent in April 2020. To compete with BigTechs, insurers need to focus on critical priorities which are important including delivering superior customer experience (94 per cent), crisis-proof processes (90 per cent), deliver real-time response (87 per cent), be a caring partner (86 per cent), and have insurance-as-a-utility (70 per cent.) While utilising the cloud and open APIs is essential, insurers are falling short. Only 19 per cent of insurers represented in the report say they have touchless processes, 29 per cent have human-centred design capabilities and digital-ready systems, 38 per cent have implemented open APIs, and 48 per cent have a cloud-native enterprise.
The report highlights that to improve capabilities, insurers can either build and buy technology or collaborate after thoughtfully weighing trade-offs among four factors: time, investment, autonomy, and differentiation. Collaborating via partnerships is the most efficient way to get the technology needed to remain competitive in the marketplace. Partnerships with specialists via shared access will ensure all insurance industry players can focus on their core competencies and deliver better value while being cost-efficient. Willingness to collaborate amongst the players in the insurance space has been increasing, the World InsurTech Report 2020 found:
·67 per cent of insurers want to collaborate with InsurTechs
·85 per cent of InsurTechs want to partner with technology providers, while 83 per cent want to collaborate with insurers
·More than 60 per cent of insurers and InsurTechs are interested in collaborating with BigTech firms
A new mindset will be required for firms to shift from capability and asset ownership to shared access to foster efficiency and encourage partnerships with specialists. It will also enable firms to focus on their core competencies and deliver better value through hyper-personalisation and continuous co-innovation.