Digital trends in the insurance industry
By Kevin Wright
The Covid-19 pandemic has opened up many opportunities by accelerating the digital transition of tasks once considered mundane. Recognizing the importance of this, almost all players in the insurance industry are digitizing themselves – some more transparently than others. This “phygital” trend (meeting of the physical and digital worlds) is becoming omnipotent, with a mixture of automation and human expertise now the norm. Over the next five years, a major innovation is expected to occur in the way products are distributed digitally, including in the underwriting and tracking process.
During this pandemic, we have also seen a change in customer expectations. There really isn’t a working day in the digital world. People expect 24/7 uptime, so we’ve seen our partner brokers work longer. There has also been a further increase in the number of people requesting quotes, likely driven by a desire to cut costs. This means that those who have a digital quote functionality have a decisive advantage.
Business has moved from complexity to complexity. A complicated world is characterized by repeating patterns, problems that can be solved through math and design, and where automation and efficiency motivate management thinking. In a complex world there are patterns, but they do not repeat themselves, problems cannot be predicted, and robustness, not efficiency, is needed most.
Insurance cannot respond to the growing risk in a complex world by offering the same products. A shift is needed towards the prevention and management of loss, towards valuable ecosystems and towards the generation of new sources of income along the risk value chain. Digitization is a key catalyst for these ecosystems.
Here are some of the digital trends we have seen – and hope to continue to see – over the past year – particularly accentuated by the Covid-19 crisis:
1. The complaints process: The biggest digital transaction in this space is for people to follow the progress of their claim. They want to be able to do it on a self-service basis. Customers want smooth administration processes.
2. New business: Being able to bid on new business online has become the norm. There is tremendous pressure to keep pace with customer expectations or to lose potential customers.
3. Goodbye old systems: Most service providers and brokers are starting to migrate their legacy mainframe backends to modern technology systems, which can expose the insurer to application programming interfaces and deliver real-time data, with 24/7 capabilities. The takeaway? An automated and technological backend means more digital capacity on the frontend.
4. Robotic Automation Process (RPA): This is always the center of attention as everyone tries to integrate artificial intelligence software and harvest – and use – the data they have.
5. Chat to voice: We are seeing growth in chat capacity – for example, WhatsApp – especially in the direct space; our MiWay subsidiary uses this feature a lot. However, South Africans are still drawn to picking up the phone and calling, especially when things go wrong.
6. Customers interact directly with insurers: This has been a noticeable change lately. Many customers are starting to contact insurers directly, especially for small things. They tend to involve their brokers for the more complex claims and queries. The move to digital channels offers opportunities for a seamless, end-to-end customer experience.
7. We will emulate other markets, but with a South African twist: Insurance is similar around the world, but different markets are at different levels of digital maturity. South Africa is lagging behind in our digital maturity, which means we can monitor other markets to anticipate emerging trends. The big changes? The products will be distributed digitally. The complaints process is fully automated, without any human involvement. Lemonade in New York City is one example, with a niche audience of renters needing insurance.
8. Product innovation: We are likely to see increased product innovation around telematics offerings for those who work more from home; this can include cyber and Internet of Things (IoT) insurance. Partnerships with insurtech providers, online platforms and mobile network operators will be essential to meet the growing demand for digital solutions. Underinsurance remains a major challenge; it is possible to design easily understandable solutions for individuals and target markets of SMEs.
9. The rise of affiliated distribution channels: We rely more on alternative distribution channels with digital associations to reach niche poles – like faith groups or sports clubs. We are likely to see the most innovation in lower value items that are frequently sold through these channels. Wider distribution through digital channels should catalyze increased access and narrow the risk protection gap.
10. Follow-up, follow-up, follow-up: We’ve been tracking driver behavior for years. Why not follow other assets? It’s easy to put a tracking device on an expensive bike, TV, and other stuff. With the rise of IoT, we’ll see an increase in tracking, which will inevitably influence underwriting and ultimately the premiums people pay.
11. Fight against climate change: The risks of climate change are increasingly recognized as one of the main problems facing economies and communities. Similarly, the government’s announcement to invest in more renewable energy offers opportunities for growth and green insurance products. In the future, insurers could work with the regulator to further develop parametric products that target risks related to climate change, such as floods and drought.
The biggest industry trends will be in the product distribution space, in particular the phygital approach remaining a major trend in the insurance industry as consumers seek digital experiences and self-service options on demand. , including valuable human contact with service providers. It is also likely that we will see an increased demand for PAYG insurance services, including innovative new risk management products that provide niche coverage for things like cyber threats.
Kevin Wright, Director of Information Systems Santam Group