In less than a decade, digitization has irrevocably changed life insurance operations. Now, carriers on the technology fast track can build stronger relationships and meet the expectations of digitally savvy customers by providing personalized, customer-centric experiences.
Policyholders expect insurers to mitigate today’s emerging uncertainties by innovating instead of serving up the same old propositions. They seek hassle-free interactions and access to offerings at any time through a variety of channels.
Tuned-in new entrants and InsurTech firms set the pace with a customer-first mindset. They raised the bar when it comes to predicting or reacting quickly to market and behavioral changes by taking advantage of advanced data analytics and technological agility.
Meanwhile, some incumbent life insurers find themselves unprepared to keep up because of legacy system constraints, a conservative mindset, and inflexible business practices that slow response rates and leave policyholders underwhelmed. Needless to say, digitalization transformation has been slow and incremental.
Nearly half (48%) of the life and health insurance executives we interviewed as part of the World Insurance Report 2020 said agents and brokers were the most effective sales and distribution channels – 19% of respondents chose websites, and 19% said mobile apps were most effective.
That thinking illustrates a considerable gap between what customers expect and what incumbent insurers are delivering.
However, COVID-19 has affected everyone’s day-to-day use of digital channels for everything from ordering groceries to talking with our doctor – increasing the need for digital- and remote-interaction models and tools. Have life insurers kept up?
An overwhelming 100% of life and annuity carriers say digital distribution is their top budget allocation priority for 2021, according to a Novarica report. With stay-at-home mandates looming in 2021, opportunities for customer/agent conversations may remain limited. Therefore, digital platforms will be must-have solutions to meet customer demands for self-service and channel mix variety.
As life insurers pilot core capabilities across the customer-acquisition value chain, industrywide digitally-mature capabilities are still few and far between. As a reference point, larger insurers are 18% more likely to have developed digitally-mature capabilities than average midsize insurers, according to the July 2020 Novarica 100 (N100) Framework. And when it comes to leveraging data across marketing, distribution, and underwriting, the industry is even less mature.
How will life insurers remain relevant now and into the uncertain near-term future? Frontrunners will offer omnichannel services and customizable customer journeys that engage policyholders at every touchpoint.
Strategic insurers will offer contextual products in sync with customers’ life events – such as marriage, home purchase, childbirth, or retirement. And they will transform the experiences of both their customers and agents by supporting multiple engagement channels that open new avenues for product recommendations.
Insurers’ digital acquisition initiatives not only give policy seekers experience-led shopping options, but they can also boost a firm’s market share and profitability. A digital customer acquisition strategy is efficient and targeted because firms can apply analytics to model prospects within micro-segments based on risk tolerance, demographics, location, and projected lifetime value.
Similarly, omnichannel digital distribution offers insurers opportunities to significantly boost operational efficiency, improve advisor productivity, and re-engineer the purchase journey, focusing on convenience, intuitive online shopping, and quick decision making. Such interactions can reduce customer acquisition costs by up to 50%, generate 5 to 10% of new premiums, and reduce customer churn by up to 30%.
Within the expanding digital environment, agents will remain critical – especially if their firms empower them with digital tools so they can seamlessly connect with policyholders and turn customer data into actionable insights.
I’m not surprised agents rank digital tools and predictive, real-time analytics high on their wish lists to boost sales interactions. Lately, agents say leads from their insurance companies are somewhat sparse, suggesting that it is time for firms to invest in data – particularly within today’s global health-crisis context.
An acquisition process that supports direct-to-consumer, agents, and other engagement approaches requires insurers to fully digitize their processes – from lead scoring to accelerated underwriting. Carriers need a low-cost, robust, and scalable technology architecture, a modern digital platform to swiftly innovate and launch new products.
Further, they can leverage third-party data and AI-based insights to enable straight-through underwriting and pricing via multi-dimensional risk analysis while replacing invasive paramedical exams with data from Electronic Health Records and related sources.
Straight-through underwriting is now a real possibility for life insurers
Last but not least, insurers must build an efficient API utility that can quickly integrate with third-party partners to fill capability gaps and improve time to market.
Despite the benefits, change is not easy in today’s dynamic marketplace. A high-impact transition requires fundamental changes in organizational operations and mindset, affecting everything from the agent’s role to building advanced, data-analytics capabilities. Progress is rare without rattling the status quo and leaving your comfort zone.