INSURANCE: Is the Economy Squeezing the Life and Profits Out Of Insurance?
Recent Gauteng Business News
IN THE current challenging economic environment, consumers are tightening up their purse strings, and many are considering cutting what they deem to be “unnecessary” costs. One of the first things that people tend to draw back on is their insurance payments for household, life and funeral coverages. This is leaving many insurance companies with the challenge of retaining their customers and achieving further growth.
To address this challenge, a vast number of insurers are breaking away from “business as usual” to explore new ways to achieve growth. New and emerging disruptive technologies – and the many ways they can be leveraged for both growth and customer retention – may well hold the key writes Jaqueline van Eeden.
From “old” to “new”
Insurance has, over the past decade, continued to build on a traditional approach with regards to retaining and increasing its customer base. However they are failing to attract younger generations with traditional product centric and distribution approach. With a product-centric portfolio that is sold via an agent distribution channel and is typically designed around a one-size-fits-all formula, insurers have managed to maintain their hold on the market. As the customer’s buying behaviours are changing there is a need to meet the urgent demands of a millennial market by insurers.
The “new customer” is no longer satisfied with working through agents to liaise with their insurance companies, preferring instead to go directly to their organisation of choice. They are also more reactive to personalised services. While most customers, both businesses and individuals, still require “conventional” insurance policies for protection and risk management, many of them are looking for far more flexibility and choice in how their policies are structured.
Unfortunately, the majority of insurance companies are only just realising the potential to be unlocked in data and analytics. Most have relied for far too long on historic and segment based data to obtain a very broad and insubstantial – for today’s market – view of their customer.
There are a number of medium to long-term trends that are predicted to disrupt the insurance industry by 2020. This includes the recent rise of the FinTech/InsurTech, ever-changing demographic landscape, and the increasing economic significance of emerging markets. All of these factors are geared to significantly impact the structure of the insurance industry.
South African insurers are already investing in new technologies that enable them to adapt to the changing environment. Digital technology and data analytical capability will be significant components of facilitating more real-time engagement with consumers. Furthermore, it will assist insurers to anticipate their changing needs and manage insurance risks proactively rather than reactively.
Insurers are slowly migrating to a more customer-centric proposition, which leverages the insights that analytics, ubiquitous data and connected devices provide. This enables them to offer personalised and tailored products, real-time, omni-channel engagement platforms, improved relationship management and a more satisfying experience overall.
Know Your Customers (KYC) has never been more important than now, and these technologies enable insurers to gain invaluable and specific insight into the needs, wants and current circumstances of their clientele. This, in turn, translates into increased customer acquisition and retention, and a significantly improved and more stable bottom line.
Remaining relevant and competitive
Insurers realised that for them to be sustainable in the future they need to be part of the life time events of their customers. Implementing technologies such as Artificial Intelligence, machine learning, Big Data and analytics can be daunting prospects for any industry. This is particularly relevant to the insurance industry which is typically mired in convention and legacy processes.
In order to be effective with these implementations, and achieve the desired outcomes, insurers can start by reviewing where their biggest costs and lowest returns are incurred. Once they know where their biggest profit drains are, and what products or services yield the lowest returns, they can begin by eliminating or streamlining these areas, starting small and growing their digital strategy from there.
Leveraging technology solve business problems as a service can help to simplify and reduce their internal Total Cost of Ownership (TCO) and help them to transform their business to meet future customer needs and be part of the life time activities of their customers. This also releases legacy infrastructure which can drain resources and capital. Insurers can look to optimise their processes, which aids in releasing capital for re-investment elsewhere.
Externally, they can delve into their historic data and identify problem areas, such as closed books – which effectively ties up capital in a veritable “no-man’s land” to be left unused for years. Investigating closed books can provide unique opportunities for insurers to upsell, or re-package these policies to their existing customers, allowing them to re-purpose the capital while giving their customers incentive to stay with them. Outsourcing this process can provide a big lift to the industry, freeing insurers from managing the processes and IT that support their mature product lines.
This data, coupled with smart devices and application-based platforms, can be put to use to better identify with their market. This allows insurers to tailor their products and offer services such as cover for only those instances when their customers require it, and none when it’s not needed.
In this way, insurers can move towards a new way of offering insurance, catering to the new customer and remaining relevant, competitive and on top of their game.
Business News Sector Tags: Insurance|