Digitisation shakes life insurance landscape

Myra Knoesen, FAnews Journalist

In today's knowledge based economy, traditional business models and the ‘old school’ way of doing business have been disrupted thanks to the likes of the cloud and Big Data technology, the internet and the new economy.

A shift in channels

According to a report released by Strategy & Today entitled ‘Life insurance in the digital age: The omnichannel revolution’, customer expectations are influenced by their experiences with social media where content, interactions and features are richer.

In addition, the report emphasises that a growing share of insurance customers are likely to search for those products online, although the conversion rate is still much lower than for short term insurance.

In the report it is pointed out that research suggests that in the next decade the percentage of life insurance policies sold online will have more than doubled in some developed economies and increased more than ten-fold in some developing economies. This makes it vital for players in these markets to prepare themselves for a shift in channels.

The research also discloses that customers have developed a propensity to manage their insurer relationship digitally. More than a quarter of customers are willing to transact and manage their needs on a completely digital basis, with little or no personal interaction.

Keeping up the pace

FAnews spoke to a few insurers in the industry about this shift in the business model and what their strategy is in the digital world.

Jack Kruger, Head of Design at the Sanlam Group said, “It would be amiss to view the “traditional” versus digital business/distribution models as a dichotomy. Both are valid. It is a question of friction. Consumers follow a path of least resistance and complexity to achieve their financial needs.” 

Considering the pace at which consumers are embracing the new economy through online retailers and services, and the way they engage online through live-chat services and social media, Leopold Malan, Executive Director: Processing and Systems at BrightRock says  insurers have great opportunities they can unlock from the ‘new economy’.

Kruger mentions that face-to-face communication is the most natural, richest interaction between a company and its customers, especially if the (financial) need or the product is complex. “With an adviser, client interaction works best. For less complicated needs, a purpose-designed, self-directed product is appropriate. Presenting, or repurposing, a complicated intermediary-designed product onto a self-directed digital shelf does not work.” 

Malan says it’s not about “adapting” – the new economy has the potential to empower insurers through the rise of technological advances like Big Data. This enables insurers to better understand consumer needs and how these needs change. The potential in this lies in the extent that companies are able to harness this new information to match individual consumer needs.

“We are embracing this environment by utilising sophisticated technology to develop a back-end with incredible processing power, which enables our product to adapt to changes in our policyholders’ lives. Thanks to this system, our needs-matched cover is intuitive, flexible and customisable to match clients’ needs very precisely over time and offer sustainable, good value for money. These products are already offering much better value and up to double the cover that traditional products could offer for the same premium,” says Malan.

“Our needs-matched approach to life cover is also reflected on the front-end through an intuitive and easy-to-navigate, web-based user interface,” he continues.

Kruger says Sanlam follows a design-driven approach to keep pace in today’s fast-moving competitive environment and to meet customers’ changing needs. 

“The heart of it is understanding, first hand, the consumer context and financial need. We literally go onto the street and talk to people, rather than commissioning third party marketing research. From there we formulate a loose postulation based on the real-life stories we have gathered. A cross-functional team is put together to work on the product design. The objective is to bring a viable prototype to market in the shortest period possible.” 

Kruger explains that the initial product release is then followed up with subsequent two week updates (sprints), in a continuous iterative development cycle, based on on-going client feedback. As a result, Sanlam’s digital products are never finished, but they continuously evolve to match consumer needs, he said. 

The reality is….

Malan says according to a 2016 global study by HSBC, the UN population division and the World Bank , there are 430 million digital natives, amounting to approximately 9 per cent of the world population. This figure is expected to rise to 2.3 billion by 2030, which will amount to 30% of the world’s population, and they’re projecting a figure of 50% by 2050. Considering that just under 50% of the South African population is considered an active internet user, South Africa will not lag behind in this shift from traditional to digital natives.

Kruger says there is an assumption that consumers are divided between “old school” middle-aged / elderly people and “millennials”. But the reality is that people above 35 are as prevalent in social media, and elsewhere, and that one does not inherit money when you go online.

“In other words, digital constituents in their 40’s and 50’s simply have more money, and savvy, to invest in their retirement / risk cover than someone in their 20’s. On the other hand, individuals in their 20’s now lead and manage multi-national organisations,” says Kruger.

“In the end, people of all ages and means will use the best designed and easiest way to invest – offline or online. Our objective is to be present and sensitive to our clients’ requirements – and provide the most appropriate cross-channel solutions,” concluded Kruger.

Editor’s thoughts:
To have the competitive edge, the industry needs to adapt to new technologies. Even though there are companies who are reluctant to use technology, they will eventually have to adapt at some point. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.