Technology plays a fundamental role in how businesses improve to gain a competitive advantage. Corporations, particularly insurance carriers, face more technological innovation and choice than at any time in history, leading to rapid digitalization of traditional, legacy business and giving rise to new “digital business” models that are reshaping the competitive landscape. How well insurers manage and sequence their individual migrations and overall enterprise transformation to digital business will determine their success or failure in the new digital world.
According to a recent study by Gartner, Inc., “By the end of 2016, insurers leading in digitalization will financially outperform slower digital adopters by 100 percent.” While insurance executives have always had to address rapidly changing market conditions, economic fluctuations, new technology and ongoing regulatory demands, they must now contend with the growing competitive threat of digital business.
While many understand the importance of this threat and the need to transform, they are all asking the same question, “What precisely is the scope of digital business for my company, and what do I need to do now to position my company to grow and thrive in the future?”
Making digital business work for you
Empowered by new technology and digital connectivity, consumers now require a new level of personalized service from providers when purchasing insurance. With pervasively connected devices like smartphones and tablets providing easier access to online information, buyers are leveraging non-traditional sources such as social media, search engines and YouTube to learn about carriers and their products.
Individuals expect their policies to be customized to meet their unique needs. While this may seem intimidating to insurers, this information can be used to set a company apart from its competitors. It presents a new growth opportunity for the carriers that can engage their customers directly and also arm their agents with the right tools to best respond to changing customer buying behaviors and preferences.
There are four key components for insurers to reshape their digital business approach and become more customer-centric, giving insurance customers not only a better experience, but the feeling that they are receiving a unique service perfectly aligned to their needs:
Establish a customer segmentation strategy. Moving toward demographically refined, behavior-based customer segmentation models enables insurance carriers to better tailor products and services to specific customer demographics and engagement preferences.
Mine policyholder and household data. Carriers possess massive amounts of household data, primarily accessible via event-driven views. This data can be more thoroughly mined to identify the most profitable policyholders and opportunities to increase product penetration per household.
Apply predictive analytics. Robust analytics can help carriers determine a customer’s propensity to buy additional products at any given time, converting every customer touch point into a potential opportunity. A business-driven master data management framework that enables structured and unstructured data capture and analysis is critical.
Develop customer-focused business processes. A customer-centric insurance company organizes its processes to support a unified and seamless customer experience across all channels, with differentiation provided by target customer segmentation.
Underpinning all of this is the power of enabling technology. The insurance industry must gain the same degree of flexibility, speed and agility as seen in digital business natives, like Uber and Airbnb.
The right balance separates winners and losers
Integrating a customer-centric approach does not mean wiping the legacy slate clean and starting over. Successfully implementing a digital business strategy requires a balanced approach that combines legacy system and process modernization with the implementation of new, digital solutions.