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Seven tech trends in insurance
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f property & casualty (P&C) insurers want to dominate the industry in the coming years, then part of their game plan should involve becoming a trailblazer in digital technology. Bain & Company believes a billion-dollar opportunity exists in digital innovations, but only firms that lead the pack will likely reap the full benefits while laggards will be left to pick up the crumbs. With the dizzying array of digital innovations flooding the market, which should P&C insurers focus on? Bain & Company and Google identified seven key technologies that are already disrupting the industry and whose impact will accelerate in the next three to five years: Infrastructure and productivity, online sales technologies, advanced analytics, machine learning, the Internet of Things, distributed ledger, and virtual reality. “These new technologies are likely to be a boon for consumers, bringing more choice, better service and lower prices,” says Henrik Naujoks, a partner at Bain & Company. For firms, these key technologies can create an “enormous” impact on revenues and costs. An analysis by Bain and Google show that a prototypical P&C insurer in Germany that implemented these technologies could increase revenues by up to 28% within five years, reduce claims payouts by as much as 19%, and lower policy Survey
Policy holders of risk and life insurance unsatisfied
In the year 2016, satisfaction amongst risk and life insurance policy holders was 67.4%, down from 68.8% in 2015, and still lower than that of all other major insurance types. Less than one in four (23.9%) risk and life policyholders were “very satisfied” with their insurance companies. These are the latest findings from Roy Morgan’s Single Source survey of over 50,000 consumers, which includes detailed coverage of over 9,000 risk and life insurance policy holders. Holders of risk and life insurance who purchased their insurance in person from an insurance company branch have a much higher level of satisfaction (76.4%) than those using all other methods. Purchasing directly from an insurance company online (74.9%) or by telephone (71.9%) also boosts satisfaction levels. In contrast, satisfaction with risk and life insurance purchased through insurance brokers is below average, at just 67.1%.
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administration costs by as much as 72%. “Pioneers in digital technology can gain an edge over their rivals by becoming more effective and efficient,” says Naujoks. “The digital laggards, by contrast, will find themselves fighting an intensified price war and scrambling to protect their competitive positions.” Making the most of digital investments Senior partner in McKinsey’s Boston office Tanguy Catlin concurs that speed is of the essence for insurers that want to maximise the returns of their digital technology investments. “Companies that move swiftly and decisively are likely to be those that flourish. Those that do not will find it increasingly challenging to generate attractive returns,” says Catlin. Insurance firms that strike while the digital iron is hot stand to win the coveted triple prize: More satisfied customers, lower costs, and higher growth. It has become a disrupt-or-be-disrupted world, so the challenge is clear for insurers: Aggressively transform and scale in digital. “The winners will be those that move decisively,” says Catlin, citing the success of first movers globally like HUK24, Direct Line, and Progressive. “These companies made big bets — to innovate products or reshape the value chain, for example —
Which digital innovations should insurers focus on?
rather than following in others’ wake.” McKinsey’s interviews with 30 executives in incumbent and attacking companies revealed that the single message most constantly repeated was the need for incumbents to accelerate their response. “Incumbents need to move quickly to compete with digital competitors that have the agility to keep pace with evolving technology and customer needs,” says Catlin.
Customer satisfaction with insurance by type
Source: Roy Morgan Single Source (Australia). 12 months ended December 2015, n=50,276; 12 months ended December 2016, n=50,144
Satisfaction with risk and life insurance by method purchased
Source: Roy Morgan Single Source (Australia). 12 months ended December 2016, n=9,436 with risk and life insurance