- Digitalization and strategic data use are key to the future of insurance.
- Digitalization creates the need for new and different roles, some of which defy the insurance sector’s conservative image.
- How should incumbent players respond to the need for digitalization when clients demand a customer-centered approach?
In this article, Gwen De Bruyn, Project Consultant, and Bram Servaes, Project Manager, of TriFinance Financial Institutions, discuss the evolution and innovations they have observed over the past few years. Customer centricity, sustainability, talent retention, and agility are all key themes that will define the challenges of the years to come. ‘By becoming an agile organization, a company can increase its productivity and better respond to the needs of customers and employees.’
The evolution of the insurance sector
Both Gwen and Bram see changing customer behavior as crucial to the evolution in the insurance sector. Customers are now accustomed to having great experiences with leading technology companies, including Apple, Tesla, Netflix, Booking.com, and many others. They expect the same experience when buying insurance products both on- and offline. A seamless, 24/7 omnichannel experience has become the new norm.
Insurers must now navigate the phenomenon of immediacy. When customers contact their insurer or insurance broker, they expect immediate answers. When they want to buy an insurance product, they want it now, not two hours from now. This puts enormous pressure on the way insurers respond to their customers, and it’s forcing the insurance industry to rethink its customer journeys.
Another evolution Gwen has observed in recent years is extended collaboration between different stakeholders in the industry. This can take the form of insurers cooperating with insurtechs, working with other insurers on joint initiatives, and collaborating with industrial or non-profit companies. But at the same time, pressure from both external factors (such as the regulatory environment and the previous low-interest rates) and internal factors (including legacy IT and difficulties achieving operational excellence) has led to more M&A activity like NN, Baloise, Athora, Fidea, Monument.
Bram was most struck by the decommissioning of several legacy systems. Insurance companies had to—and many still have to—modernize their core technology platforms. The main driver for this is increased digitalization. Technology improves the front-end customer experience and ‘digital’ drives back-end productivity gains and operational performance. Digitalization can also put pressure on outdated systems—some of which are decades old. Replacing these systems with technology platforms that support the requirements of the digital age is critical to serving today’s clients.
Key action points for insurers
Gwen feels that insurers should position themselves collectively as customer experience networks that don’t simply offer clients specific products or services but rather focus on providing a range of services and a broad experience. Consider the example of an insurer supporting a customer from start to finish following a car accident. After the accident occurs, the client calls the insurer, and the insurer takes care of everything: calling a towing service, arranging for the customer to be transported to their home, and contacting the car garage to initiate repairs. Being able to access this broad range of services efficiently would make it easier for the customer to return to ‘normal life’, resulting in higher satisfaction and greater customer retention.
Both Bram and Gwen consider talent attraction and talent retention the primary action points for insurers, especially for incumbent players. With many upcoming challenges, such as further IT transformation, ongoing expansion of customer journeys, RPA integration, and further development of a climate-focused strategy and a corresponding product offering, the insurance industry needs to create a variety of different and sometimes new roles, for instance, data experts and digital talent. This need is in sharp contrast to the insurance sector’s dated image.
To meet this challenge, the insurance sector needs to reinvent and position itself as an attractive field, in which adaptability, challenge, flat hierarchies, and open culture go hand in hand. Insurers need to reframe the role and purpose of insurance in society. If companies can achieve this, they will attract new, more diverse talent. This will require placing less emphasis on purely technical insurance skills by recruiting from a broader network across the country, or even internationally. Insurers need to reimagine their company culture. This includes, among others, rethinking their attitude towards environmental, social, and governance (ESG) practices and finding new ways of working to attract and retain the brightest and best talents.
Regarding employee retention, existing employees should be upskilled and reskilled to keep pace with the changing world, remain relevant, and add value. This will involve acquiring not only technical skills but also a broad range of soft skills. Companies also need to pay more attention to preventing burnout and bore-out.
‘If you want to have an impact on society, you need to be part of it’.
Gwen De Bruyn, Project Consultant - Financial Institutions
Adopting sustainable business practices and a customer-centric approach
Gwen believes that insurance companies can do business in a sustainable way, generating greater benefits than costs for both customers and insurers and ensuring significantly positive impacts on society. Insurers represent a significant proportion of professional stock market investors. As such, the shift towards a more sustainable economy and society should be a key theme for every insurance company. As companies, insurers want to generate profit, but they can and should be there for the greater good. They should accelerate and strengthen the transition to a sustainable economy by adapting their product range or supporting social development through their investments.
Gwen’s golden tip: ‘If you want to have an impact on society, you need to be part of it’. This means insurance companies should be more visible in the public debate and explore the roles they could potentially play.
Bram advises insurers to transition to a more customer-centric model. This will enhance and personalize the customer experience and improve customer engagement. By focusing on customer experience, insurers can better support customers throughout their life cycle. It is also important to create more specific and personalized advice and tap into new segments. Many insurtechs have understood this shift of focus and offer a digitally enhanced customer experience that can remove a lot of customer frustration.
Insurers should reclaim relevance through product innovation and coverage of new risks. Many new and evolving risks are popping up. Data and cybersecurity risk and machine-learning liability, for example, are coming to the fore. New risks require new products and a reordering of priorities. These evolutions present significant opportunities for insurers willing to innovate.
Collaborating with ecosystems and Insurtechs. As traditional industry borders dissolve, Insurtechs aim to play a role in rethinking the value chain. By making deals with Insurtechs, established players can acquire capabilities and access to products and markets that will accelerate their growth. Ecosystems will significantly influence the future of insurers. Insurers should therefore explore more opportunities to cooperate with emerging ecosystems in areas such as healthcare, mobility, and the connected home.
Executives and customer-experience teams should invest time and resources to build a deep understanding of AI-related technologies to determine where and when disruptions could occur and what this means for certain parts of the business.
Agility represents the future’s most critical skill. How quickly can insurers create innovative products in a rapidly changing world?
Bram Servaes, Project Manager - Financial Institutions
Promising sector innovations
Gwen considers machine learning the innovation that will completely change the way of working—and one that’s already changing it. Its application is obvious in many sectors, but for the insurance industry specifically, it holds the promise of significantly accelerating the lead time of extremely time-consuming processes and tasks. One example is claims processing, often a slow and heavy process. Machine learning and artificial intelligence (AI) will allow claims to be processed faster, which could positively impact customer satisfaction and retention. Other machine learning applications include chatbots that respond to questions as if the answer were provided by a real person and programs that process invoices and expense notes within finance departments.
For Bram, the most significant change in the industry is the avalanche of data from connected devices. In the coming years, more and more connected devices will come onto the market. In addition to familiar devices such as activity trackers and cars, we also observe the emergence of new connected devices such as clothing and eyewear. The data provided by these devices allow companies such as insurance companies to better assess their customers. This can lead to new product categories and more personalized pricing and services that occur in real-time. By increasing the frequency and specificity of data shared through devices, customers can provide a more accurate picture of their needs. At the same time, insurers will gain a better understanding of risks, both at the time of purchase and at a later stage. However, we must pay attention to the ethical risks associated with the use of all this data and the acceptance by the customer that the data may be shared.
Skills of the future for insurers
Gwen predicts that the commodity insurers provide to their clients will evolve from a product offering into a service offering. It is important to note that automation, RPA, and machine learning can and will take over many tasks and processes. However, employees will always be the preferred point of first contact for complex cases, and customers will still prefer human interaction for sensitive files. Because of this, clear communication—combined with a necessary dose of emotional intelligence—represents a skill that, in Gwen’s opinion, has become increasingly important. While computers and robots may take over certain tasks, people will distinguish themselves in terms of strong communication, critical thinking, and human interaction.
To Bram, agility represents the future’s most critical skill. How quickly can insurers make decisions and create innovative products for demanding customers in a rapidly changing world? How quickly can they invest money in a project to create the type of experience that customers want? Insurers that can achieve this faster will have a unique competitive advantage. To survive and thrive, insurers must change the way they work. By becoming an agile organization, a company can increase its productivity and better respond to the needs of customers and employees.
Today more and more insurance companies have already switched to working in agile teams where Business and IT profiles work much more closely together, focusing on smaller topics that quickly add value to different customers. The new hybrid way of working is a chance to create a more effective collaborative operating model that works for people and companies in an increasingly uncertain world.