Look back over the past year and try and think of a time where someone in the industry didn’t bring up the topic of industry digitalisation and the challenges it poses. For those of you who have been in the industry for a long time and are used to doing business in a specific way, digitalising your business may seem daunting with many standing back wondering where to start.
This is a hot topic in the industry and was tackled in a 2014 KPMG survey specifically aimed at transforming the insurance industry. A few of their industry representatives spoke extensively on the digital problem and gave some innovative insight into solving the problem.
What does digital mean to you?
Alwin Magimay, Head of Digital and Analytics KPMG UK, says that if a company focuses their attention on innovation, challenges can be overcome.
“I see digital consisting of six disruptive forces that either create economic value or are destroying it for our clients. These are mobile devices and apps, the Cloud, social media/networks, advanced analytics and visualization, cybersecurity and gamification,” said Magimay.
He adds that individually or combined, these can be used to create new value.
What does this mean?
Digitalisation means engaging in digital conversations and meaningful interactions with customers, and the opportunity to be at the centre of the changes in their lives. “For example, as customers’ life circumstances change, insurers could position themselves to be the trusted hub from which all changes to customer data can flow, such as alerting utility providers about an impending relocation,” said Magimay.
He added that commercial insurers could link data on weather patterns and commodity prices to help protect manufacturers from disruption to their supply chains. By thinking laterally, insurers have the opportunity to help, engage and delight their customers and hence move the relationship forward. It also helps them manage risk.
While insurers currently collect vast amounts of data, they now need the specialized skills to connect the data and build intimacy from anonymity
Are insurers behind the curve in terms of developing digital strategies?
In many countries insurance lags behind other industries in their adoption of digital strategies. Early views of digitalisation saw it as a means to reduce cost-to-service, and the sectors investing in digital strategies first were those with very high volumes of customer interaction migrating human transactions online.
“Opportunities for insurers to differentiate themselves from other providers except through price seemed limited. Now; service, convenience and customisation of experiences are all possible and customers demand it.”
“For life insurance and commercial insurance, interaction between customer and insurer remains less frequent. The level and frequency of engagement has defined the level of digitalization and depth to which digital strategies are aligned to core business strategies. Highly regulated, the industry has a low tolerance for failure,” said Magimay.
How can a firm enable digital innovation?
- Focus on people. Digital experiences do not have users, they live with people in a more intimate and direct relationship than software from a previous generation. You must adopt an ethnographic lens in any digital experience you ship;
- Keep a sharp eye on emerging trends. Consider how your digital platform can contribute to fending off or capitalising on new challengers. The strategy should articulate threats and the tactics that need to be employed;
- Do not be afraid to fail; and learn to fail safely. Digital is very much driven by the test, learn and experimental culture;
- Agility is king. Be prepared to get out there quickly and get fast consumer feedback to refine offerings and guide the final product, service or back-office solution. And,
- Embrace risk. This is a very unnatural cultural change in the world of insurance and likely the most difficult for firms to execute.
Magimay added that KPMG believes that, to get ahead, there are three main phases of digitalisation: first, automating existing processes, then collaborating and improving human interactions with rich media and, finally, reinventing and optimizing the business. This can only be done if you embrace a culture of innovation.