The insurance company has a feature that is probably unique: it has been selling the same product since its origins centuries ago. This could lead to the conclusion that it is a sector that does not advance or transform. However, it is quite the opposite; there are many things that are changing in the insurance industry worldwide and in the region.
In this article we intend to explore how the digital age presents multiple opportunities (and not a few challenges) to insurance companies. Obviously in each country there may be particularities, but we will focus on those that in our opinion are most relevant and widespread in the region.
The impact of the digital age on business
Insurance companies have always sought to get closer to their agents or brokers as a way to ensure their loyalty or preference over other companies; as well as its end customers as a way of being less dependent on the former. This has not been easy for them throughout history, for many reasons that we will surely analyze on another occasion. But, thanks to new digital resources, for the first time companies have at their fingertips attractive and beneficial means to achieve this. Thus generating possibilities of access, personalization and contact, at reasonable costs, like never before.
To this we have to add the change in the mentality, habits and behavior of customers. As a result of all this, insurers are also finding in the digital channel a means to streamline their tasks, be more efficient and ultimately more profitable.
#1. Social: a new paradigm for purchasing insurance.
Many times the concept of social is related to the simple fact of “being in social networks”, without taking into account the importance and scope of the social phenomenon from the point of view of changing people’s behaviors and habits.
At this point it is key to understand that people increasingly value the opinion of others, what they recommend, the good and the bad, they are inform, they want to know details and above all they trust what others say, often without knowing who they are. This is a relevant behavior change to assess and discuss selling insurance in the (very) near future.
If companies do not try to understand the challenges of insurance management in the future, they will be condemning themselves to observe how others grow in their market with new clients that operate under new mental schemes. Today the importance of the customer “experience” throughout the insurance value chain is critical.
This is a message not only for companies, but also for traditional insurance agents. An example of another industry that could be assimilate is the evolution of the business of travel agencies versus travel sales portals. Let’s think for a moment about the value added by travel agencies not so many years ago, and compare it with what we think traditional insurance distribution chains add today. We are not saying that agents are going to disappear, but we will surely see fewer agents in the future, more specialized and much more professional, coexisting with the direct sale of insurance based on trust and recommendations from social networks.
#2. Mobile: an ideal channel for after-sales service, in addition to generating improvements in the service offer.
Here we can observe another relevant change in the entire process of the insurance value chain. And not necessarily in the obvious that is the possibility of taking out insurance from a mobile device. Especially for the process of information and management of claims of accidents. Having an accident, reporting the location and accident to the company, taking photos and sending them, sharing the contact information of the other injured people, requesting a courtesy car or directly leaving the accident site (prior approval at the time of the company), etc., are already common currency in many countries.
The success of these new services in full expansion is strongly conditioned by the aspect of usability. Providing an excellent experience in all digital media (and in this case with an emphasis on mobile) is a fertile area for a company to compete for customer preference with its competitors.
#3. Pricing: the return of tailored policies
Linked to the previous point, another phenomenon arises that is called the “Internet of Things” (IoT – Internet of Things). This implies using the digital trail that people leave to obtain a better price for their insurance policies.
An application of this new concept is the “pay for use”: if the conditions are accepted, for example, sharing the GPS information of the cell phone with the insurance company, it will be able to evaluate the way in which the car is used every day. , the routes that are chosen, the hours in which it is driven, speed, etc. This, in addition to serving to evaluate the way of driving and even improve it with advice, training, or other services, can generate two additional advantages for the client.
On the one hand, having a personalized price for your particular risk and not an “average” price based on age or the type of car you have. And the second, the possibility of “paying for use”, that is, if the car is used a little, it pays less than another person who uses it more time.
In short, it implies going back to the origins of insurance: having personalized policies that adapt to the needs of each client, something that has been a reality in other industries for a long time (as in the online sale of clothing).
#4. Analytics: information as the basis for transformation
What is analytics?: It is the intensive use of large volumes of data to analyze behaviors, realities, facts, etc. and generate predictive knowledge in order to answer the intelligent questions that exist in the company, promoting action and aligned behaviors.
Obviously, everything we talked about above is based on Analytics: big volumes of data, handled quickly in an intelligent way.
But we can extend the concept with the following: how much better can a company’s distribution network and customer base be managed if good quality data were first available? And after having them, use them to generate personalized offers at times when there is a greater probability of accepting the offer and taking out insurance.
#5. Insurtech: enemies or allies?
There has yet to be an app or a new player outside of the traditional financial industry that will completely change the insurance business as we know it. But we have to know that there are many people, groups and companies in the world that are working to achieve it. Insurance companies should not lose sight of this. As such, we believe that insurers that successfully integrate and embed new digital capabilities into their ongoing operations, whether through insurtech acquisitions or partnerships with innovation ecosystems, will reap the greatest benefits.
Many technologies have the potential to achieve significant impacts. An obvious example is blockchain technology. While the short-term uses for insurers may not be clear, the bottom line is that there are ramifications that need to be considered.