Instant insurance, insurance on demand and real-time customer engagement are the buzzwords of the moment. These concepts are also, however, a real breakthrough in the insurance business. They describe new products and services that are strongly oriented to customer needs and follow their evolution throughout the life cycle.
These changes are part of the evolution of the market, not just changes in financial services. They are linked to technological changes and market entry by new players who have revolutionised the rules of the game.
Several factors have been particularly influential:
Digitisation of distribution and communication processes and channels
The introduction of new business forms, such as direct insurance, has removed several of the marketing and sales problems of insurance companies that were linked to the use of brokers and agents. These included having little or no information and feedback from customers and difficulty setting up marketing campaigns. Digitisation of the processes and the introduction of robotic process automation in the back office has also led to new sources of information. These are particularly useful for understanding customer sentiment and identifying problems and areas for improvement.Challengers have revolutionised customer expectations of the online experience. #insurtech Click To Tweet
Insurtech and evolution of the customer experience because of players like Google, Amazon, Facebook and Apple
The quality and level of customisation of services and products offered by these companies are very high. They have revolutionised customer expectations of the online experience. Starting in the retail market, these companies have gradually expanded into new services and financial products, including insurance. The arrival of dynamic insurance technology (insurtech) companies, offering new solutions such as insurance on demand, ad hoc travel insurance and ancillary services, may also threaten traditional insurance companies, at least in some segments.
Customer-centricity and new insurance market regulations
Further customisation of products and services is also being driven by legislation and regulations, including the Insurance Distribution Directive (IDD) and, in particular, Product Oversight Governance. This introduces the concepts of a “target market” for each product and the need to correctly identify the characteristics of customers that make them suitable for certain products or services. It also highlights problems such as mis-selling and identifies the need to take action to prevent this.
Technological change and the introduction of artificial intelligence and machine learning
The use of AI and machine learning to handle big data and dynamic data such as telematics provides an opportunity for insurance companies to increase their business by offering more competitive and personalised services, such as usage-based insurance. They can also reduce costs on manual activities with low added value by concentrating their resources on commercial activities.Insurance companies are faced with the need to make changes that require a strategic vision and an evolution #roadmap. They also need to examine the fundamental elements required to support these changes: use of #data and… Click To Tweet
As a result of these factors, insurance companies are faced with the need to make changes that require a strategic vision and an evolution road map. They also need to examine the fundamental elements required to support these changes: use of data and advanced analytics. Additional data – such as the behavioural characteristics of customers and their spending capacity, habits, wants and needs – can all feed into new advanced analytics and machine learning models. This will generate useful insights such as intention to abandon, propensity to purchase, communication channel preference and the next-best offer. These, in turn, allow insurance companies to both improve existing products and services and develop new ones to better meet customer needs. My next post in this series will look in more detail at how analytics is improving insurance services.