The competition is heating up in the property and casualty (P&C) insurance space. In fact, 90% of insurers are concerned about losing business to fintech companies, according to a study by PwC.
To stay relevant amid these shifting landscapes, P&C insurers must develop a robust, customer-centric strategy that blends the best of digital and human experiences. Three key findings should be considered to develop an effective strategy.
1. Customers expect companies to cater to their channel preferences and are increasingly open to nontraditional products and providers:
Customers are turning to digital channels to research and purchase products, and insurance is no exception. A 2016 Bain & Company report found that 51% of U.S. P&C customers used a digital channel to purchase a P&C product. Customers are willing to share personal data in exchange for the speed, convenience, and personalized advice available from digital. Insurers that are not prepared to meet these digital shopping expectations risk becoming irrelevant.
The most valuable and loyal customers still consider digital channels as a complement to offline channels, rather than a replacement. The Bain report found that digital-only customers gave significantly lower loyalty scores than multichannel customers (0 versus 7, respectively). Insurers should not blindly follow the digital wave, but purposefully integrate digital capabilities to meet customers’ needs.
Customers are also increasingly receptive to disrupters offering nontraditional insurance models. An Accenture study found that customers—Millennials especially—are more willing to purchase insurance from banks and online service providers such as Google or Amazon.
InsurTech is gaining traction by offering 100% digital journeys with new products that target Millennials’ changing tastes. Lemonade, an InsurTech startup, addresses Millennials’ sense of social responsibility by taking a flat fee and donating unclaimed funds to charities selected by policyholders. CoverWallet, a commercial InsurTech startup, is focusing on digital-first delivery of commercial P&C insurance.
CoverWallet CMO Pedro Sanudo remarked that, “The majority of small businesses begin their search for insurance online, yet have tended to transact offline through brick-and-mortar agents. However, this pattern isn’t shaped as much by consumer preference as it is the lack of high-quality online solutions until recently."
Insurers must prioritize digital transformation and product innovation to stay ahead of InsurTech disruption.
2. P&C insurers are falling short in key areas of the digital journey, including the mobile experience and integrating data from multiple channels: The insurance industry has noticed customers’ appetite for digital, but hasn’t fully addressed two major areas of impact for customer experience.
The first is customers’ growing preference for mobile. According to Adobe Digital Insights’ “Mobile Metric Refresh“ report, smartphone visits have increased by 84% in the past two years within large auto, home, and life insurance companies. Yet few P&C insurers offer mobile experiences that can be considered best in class. Existing mobile apps offer limited functionality; the majority redirect customers to the mobile website to complete key activities, such as getting a quote.
In contrast, Lemonade allows users to seamlessly purchase renters and homeowners insurance through its mobile app via chatbot. The improved in-app functionality also creates a more interactive experience than the industry’s traditional applications and paper forms. P&C insurers must develop innovative approaches if they hope to delight customers in the mobile experience.
Source: Lemonade Mobile App
Another missed opportunity is the use of omnichannel data to better address current and future customer needs. According to the Bain study, fewer than 50% of P&C insurers track signals of a life event that could trigger a new purchase. (For example, a change of address could signal a new home purchase.) One explanation is an industry-wide sentiment of a lack of control over customer data due to internal silos and external regulations.
An Adobe and Econsultancy survey of insurance companies found that only 59% agreed with the statement, “We have access and control over customer marketing and application data.” Insurers miss chances to cross-sell products and boost customer loyalty by failing to use data from new digital touch points.
3. Successful P&C insurers must adapt their organizational structure, processes, and culture to reflect this shifting dynamic to digital integration: To effectively execute a digital strategy, teams across the company must leverage data from customers’ physical and digital footprints. An important step is updating legacy data management systems to interact with each other. In fact, nearly one-quarter of respondents to the Adobe and Econsultancy survey of insurance companies reported that digital marketing is “very much separate” in the company, indicating enormous organizational silos. Companies need to break down these silos in data and communication to unlock the efficiencies that digital can provide.
Inevitably, major organizational changes demand a cultural shift and strong change management plan. Research by McKinsey & Co. found that 46% of financial services executives feel that cultural and behavioral change is the biggest challenge they face in pursuing their digital strategies. Insurers must be aware of internal pressures they may feel from traditional channels and strive to bring them along on this transformation.
Once organizational change has been enacted, the opportunity comes for new, innovative approaches. Digital transformation can hugely impact internal operations by increasing efficiency and reducing error rates. McKinsey reported that a “thoughtful digitization program” can lower costs by up to 65% and reduce turnaround on critical processes by up to 90%. By maximizing processes, insurers can focus on innovating, testing, and refining their customer journey.
Adopting a blended customer approach can have significant impacts on insurers’ bottom line. A Bain and Google analysis predicted that a prototypical German insurer could increase revenue by 28% and reduce gross costs by 29% in five years.
To make these projections a reality, P&C insurers are advised to leverage existing data to discover quick wins while refining a long-term vision for digital in their external and internal objectives, such as cost reduction, customer acquisition, and relationship-building. If done so appropriately, these insurers will harness digital as an advantage, rather than a risk.