To remain competitive in today’s rapidly transforming insurance industry, insurers worldwide must address regulation, digitisation and customer interaction challenges. In a five-part blog series, TransUnion Senior Vice President for International Insurance Robin Wagner takes a look at how data and analytics can help insurers tackle the industry’s most pressing challenges – starting with digitising the customer lifecycle.
The global insurance industry has undergone rapid transformation over the last few decades. We’ve moved from the insurance sector of the 90s that relied mostly on declared (and sometimes subjective and inaccurate) information provided by consumers, to a data-driven industry that is racing to incorporate the strengths of InsureTechs with the capabilities of traditional insurers. What used to be a set of standard questions about a consumer’s work and home address has transformed into complex decision-making processes that can rely on third-party data assets for advanced decision-making such as credit, violations data, vehicle license data, and claims and coverage data.
Most insurers are faced with the same journeys and same processes. All of them acquire customers, go through the quoting and underwriting stages, and maintain customers on their books until and after a claim event. While different markets are nuanced by country-specific regulations and consumer behaviour, there are five key challenges that all markets have in common: digitising their businesses; going direct; enhancing pricing and segmentation; improving solvency management; and taking the risk out of risk prediction. Let’s start with one of the biggest (and most pressing) challenges insurers face: digitisation.
Digitising across the consumer lifecycle
We are at the dawn of a new consumer-first era and businesses across all sectors need to revamp the way they do things. Interacting with businesses on a digital platform is the new normal as consumers have gravitated towards the better experiences they offer.
The rise of the InsureTechs has put traditional insurers under huge pressure to digitise their businesses. Around 61%1 of InsureTechs globally have formed purely to optimise the customer experience throughout the insurance journey — and consumers have taken note. From purchasing insurance to managing a policy online and submitting a claim through a mobile app: everything is being done digitally, quickly, and easily.
This is one of the biggest trends we are seeing worldwide, and the race is on to digitise as efficiently as possible. Unfortunately, traditional insurers are faced with legacy infrastructures and IT systems that are straining to adapt and enable this transformation — leaving them vulnerable to significant financial losses. Over the past five years, auto insurers in the USA have seen expenses and losses consistently outweighing premiums and have already lost around USD 4.2 billion in underwriting profits per year2. If they don’t improve efficiencies by digitising their businesses, they can expect to see more annual profit declines of between 0.5% and 1%.
All is not lost for traditional insurers though: they do still control access to the majority of policyholders; a captive market that new entrants don’t have. In a way, what InsureTechs gain in their agility they lose in market share, but these odds won’t forever be in traditional insurers’ favour. This is why it’s so important for insurers to adapt their processes and offerings in line with digital transformation and represent it to the existing book they already have as quickly as they can.
Going digital means more than going mobile
It's necessary to point out that, while digitisation is an essential opportunity to leverage, insurers shouldn’t limit their innovation journeys only to being mobile. Offering an omnichannel experience is an important aspect of going digital, so making the experience and quotation the same across mobile, agent, branch, and bank channels is critical.
In markets like Hong Kong… all you need is a photo of your ID card and a simple selfie. Technology like our multi-layered eKYC solution can authenticate the selfie… and generate a quote — based on accurate personal information — within a matter of seconds.
In markets like Hong Kong, for instance, we are seeing great technological advancements that are making it easier and easier for consumers to deal with insurers. All you need is a photo of your ID card and a simple selfie to complete a Know Your Customer (KYC) check. This is where technology like our multi-layered eKYC solution can authenticate the selfie as a live picture that matches your ID document and generate a quote — based on accurate personal information — within a matter of seconds.
For insurers where drawn-out claim turnaround times equate to higher pay-outs, having access to image recognition software that can settle claims in a matter of hours also becomes invaluable. This enhanced consumer experience will help insurers capture and maintain valuable market share in a hyper-competitive environment. More importantly, it’s empowering insurers to meet customers on their terms, where and when it suits customers, without compromising on data security or fraud prevention.
Problem solved: Data and technology are unlocking new ways of taking consumers through a digital journey, from acquisition to underwriting and claims, without compromising on risk management.
Our next challenge: going direct
Going digital and transforming into a direct insurance business sometimes go hand-in-hand. Our next blog will discuss how data can help insurers achieve the right levels of automation and digital excellence to go direct without compromising on customer experience.