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Why should P&C Insurers care about digital?

At the 2016 IASA conference, held in San Antonio, Texas - Novarica, Erie Insurance and ValueMomentum collaborated to present a session titled ‘Digital Journey: From Strategy to Implementation’. Moderating the session was Raj Samanthapudi, CEO of ValueMomentum. His keynote shared that the digitally innovative companies have been leveraging advancement in technology to bring disruptions to businesses from time-to-time, and today they are leveraging digital to bring disruption to the insurance industry.

Matthew Josefowicz, President/CEO Novarica, one of the distinguished panelists in the session, presented his thought leadership by stating how the new entrants are building their businesses with the core objective to provide modern experiences to customers, and how they have been successful in gradually chipping away at existing players’ dominance in the market.

Digital is here and it’s here to stay

The need for digital is here. It causes disruption, but it’s inevitable for your business. Everyone’s expectations have changed in how interactions take place.

Speaking at the session Raj Samanthapudi stated that the advancement in computing capabilities over the last few decades and widespread accessibility has made paradigm shifts in how companies do business. It all started with the remarkable rise of personal computers in the 80s. Since then, there has been an exponential growth in computing power accompanied by rapid drop in personal computer prices bringing computing capability to millions of households. Then came the mobile phone and changed the way people communicate forever. We soon have billions of people walking around with smartphones, as powerful as PCs, which provide unprecedented ability to access communication channels anytime, anyplace. The most recent technological innovation, which is transforming businesses, is the Internet of Things, where computing capability is extended to trillions of physical ‘things’ like buildings, cars, machines, wearable devices, etc., indicating unfolding of a new era of connected devices.

Digitally innovative companies are leveraging this highly prevalent computing capability to their advantage and brought waves of innovations to businesses disrupting the traditional models. The wave they brought first was in the form of Internet that provided easy access of information to everyone. Then came e-commerce that leveraged mobile and internet based-technologies, and revolutionized the way products can be bought or sold virtually all around the globe. And in the most recent time, there is the social media networking wave allowing people to bond with people. These innovative companies are now leveraging Digital to bring innovations to the insurance industry. Digital is empowering them to bond with their customers, partners, and employees. This bonding is helping them to provide meaningful information to customers, serve them even better, deliver more benefits & advisories, and establish longstanding relationships.

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New entrants are leveraging digital with a goal to offer superior customer experiences

Speaking on recent insurance market trends and evolving customer behavior, Matthew Josefowicz stated that there has been an unprecedented amount of private equity and venture capitalists’ interest in the insurance technology space. The technology companies are investing in customer-focused innovations affecting the entire insurance customer value chain. Matt pointed out that five years ago when he predicted the potential of small businesses going direct, there were a large number of people who didn’t agree. Today, that change is happening. Companies like Hiscox are doing great as direct insurers leveraging digital and gradually many others are joining them.

Matt further added that insurance customers, distributors and internal stakeholders’ expectations are not necessarily set by insurance industry alone, but also influenced by other digitally advanced non-insurance entities like retail & financial services industries and technology we use in our day-to-day life. The technologies we use at home today are developed by multibillion-dollar technology companies like Amazon, Google, et al. enabling us to do things really easily, and making us more frequent users of information technology than we were five years before. This has influenced customer buying behavior creating a dramatic differentiation in their expectations. Traditional P&C insurers are being forced to deal with this today by building on to their legacy core applications.

There have been infusions in investment from third parties for new entrants and business models for the insurance industry.  In contrast to more traditional ones, the new insurance players have built their businesses based on the core objective of providing desired digital experiences to customers. They are exploiting the traditional players’ lack of understanding of evolving customer expectations, unwillingness to self-disrupt their business models, and their legacy information technology capabilities that inhibit them from being nimble for changes.

The product today is Experience, but not traditional risk transfer at a fair price

Matt made a case stating that there is a noticeable difference in viewpoint between traditional insurers and new entrants about customer expectations. The traditional insurers spent a lot of time and effort enhancing their core insurance products and functions as if they were selling risk transfer to customers. The marketing message typically is ‘selling fair coverage at a fair price’, undermining the very concept of incorporating ‘experience’ into their products thus failing to communicate the message of ‘providing safety’ to their consumers. The insurance industry, essentially, is all about providing insureds the feeling of safety and security. The new entrants are amply communicating the ‘feeling of safety and security’ that their product bring to their consumers at all touchpoints by digitally enabling their entire sales and service processes. They are meeting this modern customer expectation by fixing the broken experiences and broken traditional business models - leveraging digital.

From all these perspectives, it is clear that digital is here to stay. It is playing a pivotal role in insurer’s business to engage customers digitally to deliver expected and innovative experiences, enabling them to effectively compete and thrive in the insurance marketplace. 

WATCH THE FULL VIDEO OF THIS SESSION


If you are inspired by the takeaways of the post and want to learn more, click below to watch the complete recording of the session titled The Digital Journey - From Strategy to Implementation.

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