Digital insurers: the transformers vs. the followers
In the last few years technology has played an increasingly important role in the evolution of the industry.
Emerging technologies address key challenges in the insurance industry, such as growth and retention, risk and compliance. To compete successfully and operate more efficiently, insurers are deploying technology such as mobile devices, social media, Big Data, predictive modelling and cloud computing.
Accenture, one of the world’s leading organisations providing management consulting, technology and outsourcing services, recently published the Accenture Digital Innovation Survey in which interesting findings were made, as 141 C-level insurance executives across Europe, the Americas, South Africa and Japan were interviewed. These people are all responsible for the digital sectors of their companies and were asked about the plans for transformation in this area.
Identifying the gap
One interesting finding from the research is that there is a gap starting to emerge between the leaders, whom Accenture have called Digital Transformers, and the followers, called Digital Followers. Digital Transformers are adopters and innovators, while Followers are simply digitising their processes without changing the business model or its growth potential.
The survey data shows that the overwhelming majority of insurers believe that digital technologies are changing the fundamentals of the industry. Seventy five percent of insurers expect a major transformation of the insurance value chain within the next five years, 84% feel that digitalisation is changing customer expectations, while 84% feel that new technologies will radically change traditional practices. Eighty three percent agree that digital technologies will transform the way they interact with customers, while 73% will use their channels. On the other hand, 39% think existing insurers will lose some margin as a result of digital technologies.
Existing players that innovate expect faster growth than new entrants: 31% of insurers expect innovation to increase market share by up to ten percentage points. Twenty nine percent of the respondents expect premium growth to come from expanding their customer base using digital channels.
The results show that 58% of Digital Transformers have formed new distribution partnerships, 73% have a digital strategy in place covering the entire value chain and 38% of the Digital Transformers have acquired a start-up or innovative player.
John Cusano, Senior Managing Director of Global Insuranceat Accenture said there are many examples of successful platforms in the insurance industry where data and applications are integrated with digital business partners to create new business models. “For example the Vitality platform developed by Discovery. Its model, together with its more than 50 ecosystem partners, quickly won the carrier dominance of the local market, and today some of the biggest insurers in China, Europe and the U.S. are looking to roll it out in their own markets,” he said.
South Africa - transforming or following?
Some insurers in South Africa believe that the use of technology is increasing, as many short-term insurers have and continue to develop, for example, apps for services like emergency assistance.
Anton Ossip, Chief Executive Officer of Discovery Insure, said that there are a handful of insurers who provide telematics products. “Additionally, big data capability is continually being developed and enhanced. There is increasing urgency to ensure that insurers are able to collect, retain, and analyse their clients’ data rather than it being housed at third parties.”
“If we consider the short-term insurance industry as a whole, South Africa probably falls into the ‘follower’ category, but there are insurers who are embracing technology and providing innovative new products. Our propriety telematics based safety feature ImpactAlert is one of the products that define Discovery Insure as a transformer globally rather than a follower. If early adopters continue to be innovative and able to learn, adapt, and grow they will execute and deliver successfully within the digital transformer space,” continued Ossip.
According to Greg Potter, Executive Head of Information Systems at Centriq Insurance,businesses have existing process models that are not easy to change, while some businesses may not recognise the need to change. “Technology, in general, is the entry ticket to the game. If you do not have it, you cannot play. However, the bigger problem is that the ‘cost of the equipment’ (technology) just to play is going to mean that smaller companies without resources are going to get left behind,” continued Potter.
“The challenges around transformation in South Africa are about what the industry is doing to level the playing field in terms of transformation efforts and achievements. The industry, to a large extent, has followers and quick followers. However, a number of companies are actively using digital transformation to enhance operations and engage with clients,” said Gari Dombo, Managing Director of Alexander Forbes Insurance.
Teshlin Akaloo, Head of Upper Market Segment at Momentum, said that traditional systems struggle to enable delivery. “The biggest challenge we faceis that new functionality replaces old functionality daily. Therefore, we as an industry cannot afford to wait to adopt. Technology is advancing rapidly and consumer expectations are changing quickly. Waiting will just mean that you become irrelevant.”
“Meeting the consumer need should be at the heart of why we adopt technology,” continued Akaloo.
The balancing act
According to the survey, the majority of insurers remain uncertain about how to adopt digital technologies, and become Digital Transformers. However, Accenture encourages insurers to adopt a solution-based client approach, develop new partnerships, and lastly, create an outcomes- based digital business strategy.
“There are pockets of excellence that exist in the South African market. In other places, we are playing catch-up. That does not mean that we cannot leap frog international players” concluded Akaloo.
Editor’s Thoughts:
To have the competitive edge, the industry needs to adapt new technologies.Even though there are companies who are reluctant to use technology, they will eventually have to adapt at some point.Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
Comments
The importance is , for consumers to be CORRECTLY INSURED AT ALL TIMES and that , I am afraid , is not a techno action managed by the consumer themselves , but by the intervention of an expert ( read advisor ) , the same as a medical dr. would .
Surely technology plays a role to enhance the industry and add value to purer risk and easier admin and must be invested in . The rest is pure speculation and a bad investment.
We need much more leadership and wisdom projected in our industry and not just popular speculation.
The key remains , what serious questions were posed during the survey and answered by whom .So called experts are hard to come by lately...........please investigate more. Report Abuse
However at the front end one has to distinguish between the "sausage machine" business (pile it high and sell it cheap) and the mega (corporate) business. For the former technology is perfect and perhaps we will see the disappearance of the traditional underwriter and broker type whereas with the mega account we still need the skilful deal makers and they are a dying breed Report Abuse