Pierre Audoin Consultants (PAC), with the help of CSC, recently surveyed 157 French insurance executives involved in the digital transformation of their businesses. The resulting study (French language) identifies four waves in an insurer’s digital transformation journey, each of which could force insurers to rethink significant parts of their established business models. The four waves identified by the study are:
Wave 1: Digitizing customer relationships
- 43% of insurers have appointed a chief digital officer
- 58% of insurers have already tested or implemented robo-advisors
Insurers surveyed cited the study of customer experience and behavior as their first priority. Customers are now constantly connected. Because of this, insurers need to open new sales channels, improve customer interactions and synchronize those interactions across all channels to ensure a more consistent experience. The future of customer interaction might be in automated channels such as robo-advisors or chatbots.
New skills and new areas of focus are needed to carry out these customer relationship–related projects. To address this need, many insurers have named a chief digital officer and hired specialists such as customer experience and customer interface designers. Close customer functions (marketing, digital, customer experience), the study found, are now the main sponsors of internal digitization of the customer relationship. The CIO no longer has a monopoly on technology decisions.
Wave 2: Knowing your customers better
- 75% of insurers will have a data-driven offering portfolio by the end of 2016
Insurers understand the potential of operationalizing their data. However, much of that data remains insufficiently oriented to the customer experience.
That’s partly because, thus far, the insurance sector has been satisfied with a predominantly tactical approach to data consumption and analysis. Investment is hampered by lack of budget and lack of internal skills. Regulations, meanwhile, continue to restrict the use of personal data, as has the continued reluctance of some customers to share their data.
This approach, however, needs to change. In many ways, data is the source of digital transformation. It’s a raw material for value-added services, in a world where the production of data has increased exponentially. Beyond using the data they already have (client folder, public data, etc.), insurers should also leverage data from new digital tools (social networks, connected devices, etc.) to attain a deeper and more predictive understanding of their customers.
Wave 3: Transforming business model
- 47% of insurers are considering partnerships with sharing-economy players
- 34% of insurers are considering partnerships with Internet of Things players
- 23% of insurers are considering partnerships with automakers
Insurers want to improve customer relationships by offering new, value-added services enabled by connected objects. Possible capabilities include road safety enhancements, teleconsultation opportunities, and telemonitoring functionality and analysis. By adapting to the growing demand for personalized services, they can provide new value during the customer relationship life cycle and increase opportunities for customer interaction.
Emerging players in the sharing economy, such as Airbnb, will be the first partners of insurers in a new ecosystem of connected objects and connected companies. Insurers are natural partners in this new kind of ecosystem, because they serve as natural intermediaries between the owners of assets (vehicles, housing, etc.) and the users of these goods.
Wave 4: Preparing to automate (blockchain)
- For 54% of insurers, blockchain-based smart contracts are a critical step forward to reduce costs, streamlining processes that are currently spread across multiple databases and ERP systems
- For 34% of insurers, blockchain-driven processes will help them compensate their clients more quickly/will provide their clients quicker access to compensation
Blockchain technology can help secure and automate the new services mentioned above to further personalize the customer experience. In fact, it is perceived by many survey respondents as a deal breaker for traditional insurance offerings.
While most insurance companies remain in an observational phase, some are already experimenting with the technology. For most respondents, blockchain is primarily seen as a way to reduce costs, including through the automatic execution of contracts or “smart contracts”. It is also considered a trusted tool for securing customer data, among other things.
When asked what will be the main differentiator to win market share in 2020, insurers overwhelmingly cite the ability to offer fully customized pricing to clients. This need for personalization by customers is reflected in many current initiatives.
Clearly, like their counterparts in other industries, insurance companies face a new and increasingly significant risk to their business. And while they face these waves, innovative digital players threaten to cut them off from their customers and siphon off business value. This is why the sector is mobilizing to improve customer satisfaction and loyalty through an enhanced service offering that is both more innovative and more personalized.
Gilles Guedj is managing partner of Insurance Consulting for CSC France.