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Inventive Insurers in a post-coronavirus world

Capgemini
April 27, 2020

As anyone with kids knows, being a new parent can be exhausting. The sleepless nights that accompany those first couple of months can drive anyone to at least entertain the idea of hiring a night nanny – someone to take care of the baby during those early years when they do not sleep through the night. That moment happened to my wife and me recently, when we gave in and hired a nanny that my aunt recommended. This nanny was gracious enough to agree to come to our home four nights a week, even though she is over 60 years old and we live in the age of COVID-19. I feared what would happen to her if she got sick, so I decided to pay for her insurance. But instead of speaking with an agent, the channel preferred by 69% of insurance customers, I decided to first do my search completely online. What I found was although there are plenty of tools online that helped me with the search, the actual variety of products offered online was not expansive as I had expected. Not wanting to spend a lot of time on the search, I decided to buy a policy without thinking about it too much, knowing I probably could have found something better.

Over the last couple of years, the online channel for insurance seems to have had some early promise that has since leveled off.

According to a 2018 survey by the Insurance Barometer Study by the Life and Health Insurance Foundation for Education (LIFE) and LIMRA,  while life insurance purchase attempts online had tripled from 2011 to 2017, there was a slight decline in the percentage of customers who visited life insurance websites prior to making a purchase from 2017 to 2018. But, as the world collectively hunkers down under quarantine, I see an opportunity here for online channels to dramatically increase in importance for insurance companies and agents of all kinds of insurance products, from PNC to life and annuity to health.

From my perspective, months of being asked to stay in our homes will:

  • Change our preferences in favor of technology solutions given communicating with actual people is getting harder, with long wait times and mixed results
  • Get us even more used to using self-service tools and online channels, especially in areas where we traditionally would prefer a low-tech solution.

From restaurants to retail, consumers everywhere are changing how they interact with companies and increasingly relying on technology instead of human interactions.

In fact, there is already some early evidence that online insurance channels are seeing as much as a 40% increase in volumes during the crisis. While this shift online was occurring slowly and gradually pre-COVID-19, social distancing has the potential to accelerate the adoption of this trend. If true, then those carriers, brokers, and agents who excel in the virtual world in which we are all now forced to socialize, shop, and live, have an opportunity to capitalize on this likely permanent change in behavior. But capitalizing on this opportunity will not happen automatically. Investments will need to be made by all parties in the insurance value chain to create an online experience that rivals or, better yet, improves upon the pre-COVID-19 insurance experience.

Unfortunately, the insurance industry has a long way to go if it wants to capture this opportunity and create a digital experience akin to other industries. According to a Capgemini study from 2019, the insurance industry ranks last among seven other broad industry categories in their digital capability – lower, even, than the utilities industry. Clearly, building digital capabilities is a challenge for the industry overall. However, from what we can see, those insurers that rise above the crowd do four things:

Be digital first 

The leaders have a digital presence that is not limited to one aspect of an insurance process, such as sales. Instead, they build great digital experiences for every customer journey touchpoint. They use technology to build intelligent and fully digital processes[1] in acquisition, underwriting, claims, adjustments, policy reviews, renewals, and everything in between. They invest in digital processes so the whole product and customer journey for buying and servicing policies comes together online.

Take personalization to the next level

The leaders know more about their customers and create the products each individual demands in his/her own context and moment in life. They collect relevant data, partner with others to supplement their data with other meaningful insights about their customers, and have the capability to analyze them in useful ways. They exhibit true customer centricity by not just having the data to know what customers want and need in their individual policies, but by making those products a reality and making the experience to buy and service them easy.

Leverage partnerships

The leaders partner and integrate with cutting-edge insurtechs that are changing the way insurance works. They are smart about not building technology from scratch when they can partner with an existing provider that already excels in the area. They form open ecosystems that have the capability to bring insurtechs together to bolster their products. These open ecosystems also go beyond the traditional insurance products and enable incumbents to innovate faster, introduce parametric, UBI- or IoT-based insurance products, and/or even incorporate non-insurance related services such as plumbers fixing broken pipes or electricians fixing bad wires.

Lead the change

The leaders also know that they must accelerate the change themselves. They nurture nascent technologies and innovations that bring agility to their products and lead change within the industry though internal VC functions, hackathons, or skunkworks.

Excelling in all these areas is probably too big of an investment for any one carrier. Instead, we suggest that carriers clearly identify and define what their strengths really are in the offline world, prioritize them, and come up with a roadmap on how to channel those strengths into the online world. In other words, take the source of your competitive advantage and build that advantage in the digital channel, creating a seamless experience and a unified strategy. For everything else, be average.

We predict that the rate of change in this industry is going to be dramatic and the post-COVID-19 world will be one in which consumers are increasingly comfortable buying insurance through online channels, without needing to meet with an agent in person.Even if our prediction is wrong, there are plenty of other reasons to nurture a better online presence anyway.

At 59 years old,  the average age of an insurance agent implies that a majority of them will retire soon.

Looking at where the industry is as a whole, the carrier that can truly master the online world has a chance to be an industry leader. Take advantage of this recent change in behavior from consumers all around the world and make a digital insurance experience that can not only go toe-to-toe with the traditional agent-facing experience, but also be a game changer.

Do you think we have it right? Have a different opinion? Let us know what you think.

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[1] Intelligent Processes are processes that are powered by Robotic Process Automation and BPM tools and are supported by AI/ML tools for complex decision-making, enabling straight-through-processing for the vast majority (over 65%) of all elements being pushed through the process