Insurers “only playing” at the digital game
Wednesday 23 October 2013 — Insurance companies have high digital ambitions but have failed to take action and embrace the digital world, according to a new EY survey Insurance in a digital world: The time is now, launched today.
- Insurers globally are failing to engage with digital customers
- Insurance industry significantly under-exploiting mobile technology
The survey found 80% of insurers globally don’t see themselves as digital leaders, believing instead that they “only play the digital game” or are still learning to use digital capabilities. The survey also found the majority of insurers (81%) believe that they could lose competitive advantage if they fail to embrace digital, and 74% feel it may affect their ability to innovate.
As EY Partner Andrew Taggart explains, “Digital is a massive market force dramatically altering consumer expectations across all sectors, and insurers cannot afford to be left behind.”
While more than two-thirds of survey respondents felt they had delivered some quick, easy wins, this had not been accompanied by the development of a longer-term strategy to help realise their ambitious digital objectives.
“On the whole, insurers acknowledge the need to evolve in response to constantly shifting consumer expectations, but are currently holding themselves back due to internal factors, primarily lack of technology investment and digital mindset,” Taggart said.
Conducted in July 2013 with participants from more than 100 insurance companies globally, the survey highlights slow digital uptake in the insurance industry right across the globe, with each of the regions having different inhibitors of digital growth. While legacy technology constraints impede the Americas, Europe struggles with slow pace of delivery and Asia-Pacific is more concerned about regulatory restrictions.
“At a local level, we know that Australians are strong adopters of digital and mobile technology. In fact, EY’s 2012 Global Insurance Customer Survey found Australian customers expected their use of online resources to research insurance products would increase dramatically over the next few years, more than doubling across both general and life insurance,” Taggart said.
“Other industries are already providing much higher levels of digital service and this is something consumers are coming to expect as the norm. While Australian insurers have made some digital inroads when it comes to motor vehicle insurance, they are still lagging well behind in all other categories and will need to act fast if they want to keep up with consumer expectations.”
Disconnect between ambition and level of investment
Sixty-eight percent of respondents globally spend less than 10% of their business and IT development budget on digital. Yet despite this, insurance companies have significant short-term ambitions when it comes to digital, with 57% of survey respondents saying they intend to have a regularly updated digital business case and 78% aiming to have an organisational structure that supports their digital strategy within the next three years.
Lack of strategy and legacy systems the biggest barriers
Survey respondents cite the lack of a single cohesive digital strategy business case (47%) and appropriate operating models to deliver digital capabilities (57%) as major challenges. Legacy technology is also hindering the process, with 80% of insurers globally citing legacy technology constraints as a major impediment to growth. Respondents also consistently cite intermediary and agent channel strength or resistance among the top three inhibitors in implementing a digital strategy.
“With technology changing so rapidly, insurers need new skills to exploit the digital challenge. Analytics has emerged as the most in-demand skill-set (cited by 75% of survey respondents), followed closely by digital technology and marketing capabilities,” Taggart said.
“Analytics is increasingly important for insurers hoping to navigate the rapidly evolving digital landscape. Without the appropriate analytics and data skills in place, their digital business case may never be realised.”
Enhancing the customer experience
A startling 89% of insurance companies admit they do not leverage past interactions when recommending products or services to online customers. The survey also found that just 1% of insurers currently offer online rewards, discounts, apps or “live” website assistance – although 27% expect to provide these benefits in the future.
“In Australia, the increasing level of churn within both life and general insurance can’t be ignored. While many Australian insurers are using digital processes to reduce cost and drive efficiency, they still are missing out on opportunities to have a richer, more meaningful engagement with customers. Customer communication and engagement could be greatly enhanced through better use of social media, digital content, loyalty programs and analytics,” Taggart said.
Embracing the mobile and social media wave
EY’s survey found that only 43% of insurers are currently providing mobile quotes, compared to 72% who provide these online.
“Insurers’ focus on mobile products and services is limited. With mobile and tablet use growing exponentially, in neglecting these channels insurers are essentially turning their back on the future – particularly in a market like Australia which has such a high uptake of mobile use.”
“Insurance companies should also be taking social media more seriously, recognising its value as a relatively inexpensive marketing tool and a means to engage with and influence skeptical, digitally-savvy younger consumers.”
“Both globally and within Australia, customers are already starting to demand considerable changes in how their insurance is delivered,” Taggart said. “In this environment, the winners will be those insurers who can integrate digital with their existing channels to deliver truly differentiated customer experiences.”
“Whether insurers can make the ambitious changes they envisage within the next three years remains to be seen. Attaining their goals will require significant – and rapid – investment and improvement to close the current gap.”
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