Keeping growth within the crosshairs becomes a key priority
We are increasingly living in a disruptive world. And according to recent research undertaken by PricewaterhouseCoopers (PwC), globally, the insurance industry is facing more disruption than any other industry.
This is being driven by the levels of change we are seeing in the global market, and the report shows that the pace of change experienced in the insurance industry is progressing more rapidly than expected and will only accelerate. Stephen O’Hearn, PwC Global Insurance Practice Leader, points out that the industry is at a pivotal juncture as it grapples with drivers such as changing customer behaviour, new technologies, and new business models.
Resolve the back book
Just because the industry is now being forced to deal with change that is progressing at a much quicker pace, it doesn’t mean that companies must just sit back and live with it. In order to deal with this change, there are a number of priorities companies can deal with as a matter of urgency.
The back book is one of these urgent priorities that needs to be looked at. Insurers have been operating in South Africa for a number of years, and there are legacy issues regarding their back books.
“In an environment where understanding your customer is dependent on data mining and data analytics, managing a back book is an issue a number of insurers need to come to terms with,” says O’Hearn.
This is being done in a number of unique ways. Some companies are finding it easier to sell their back book as opposed to managing it, which is causing churn in the industry. This is also compounding the issue as one insurer is passing on a significant back book to another insurer who may not also have the necessary skills or capacity to deal with converting legacy information into new information.
“In order to deal with this, we could see a number of industry tie ups in the coming years. The top four insurers in the country are over one hundred years old and have legacy information. Tie ups with emerging digital companies in order to convert this information into useable data will happen over the next two years. Watch this space,” says Victor Muguto, PwC Long-Term Insurance Leader for Africa.
Facilitate innovation
One of the big drivers of the rapid rate of change in the industry is the global adoption of mobile technology, which is happening at a rapid pace. Because of this, companies need to embrace innovation and devise strategies whereby they remain up-to-date with technological advancements.
“This is a big issue in the USA at the moment. The country’s biggest insurers are placing executives in Silicon Valley so that they can be at the forefront of keeping abreast of cutting edge technological changes. Feedback from these executives indicates that the best innovation in the industry is being centred around customer centricity,” says O’Hearn.
He adds that PwC did a global survey on the adoption of technology around the world, it points out that in 2015, 38% of respondents said that they were uncomfortable with embracing technology. This is set for a dramatic change as the research shows that this number will drop to only 23% by 2020. By contrast, the number of digital converts and digital natives will increase exponentially.
We have all heard of the term digital natives, members of the population born into a world of technology and connectivity to the internet rather than moving towards it. Technology is all that they know. It is becoming clear that insurers need to start becoming digital converts or digital natives if they want to tap into this market.
Look towards growth
If for no other reason, this needs to be done because of the rapid increase of disruptive technologies and new entrants into the market. Within the next three years, insurers will have to compete with companies who are not necessarily players in the financial services sector.
In the UK, Google has launched an insurance platform whereby the public can launch onto the search engine and get motor insurance quotes from up to 127 providers. In China, one of the country’s largest insurers Ping An has teamed up with tech companies Alibaba and Tencent in order to access their customer base.
The question remains, will the role of the broker become diminished? Muguto points out that insurers will likely take a multi-channel approach where the simpler products such as motor insurance and household insurance will be distributed via online channels (which the insurers will own), but there will still be a significant demand for brokers when it comes to selling the more complex products as customers need to know what they are purchasing.
Insurers are also not as confident about growth in the current market as they were five years ago. Expansion into developing markets is a buzzword where companies are focussing on aiming products at the young expanding middle class. In developed markets, insurers are coming to terms with longevity and are focusing products at older segments of the population.
Editor’s Thoughts:
The insurance industry is at a tipping point where companies need to develop and execute strategies around growth in technology and the treat of disruptive technologies. Becoming a digital natives is a key coping mechanism companies need to develop strategies towards in order to capitalise on growth. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
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