5 steps for insurers to add a digital-only line of business

Co-authored by Raphael Troitzsch

If yours is a traditional insurance company wanting to open a digital-only business, you may be at a disadvantage compared to your digital-native competitors – unless you’re willing to learn from their experiences.

Whether you’re entering a new market or wanting to start an entirely new line of business, being able to say, “there’s an app for that” can make your product more attractive to customers craving the convenience and flexibility that digital-only can offer.

Digital-only might mean that they can scan and send all the documents needed electronically, eliminating paperwork, for instance. Or it might allow customers to purchase micro-insurance from you, perhaps insuring a single item or experience for a specific period of time. In an increasingly digital world, these kinds of options are becoming more popular.

Besides attracting new customers to your company, your digital-only line or product will bypass some of the expense and complexity that your traditional insurance services need to function. “Digital-only” means much of the processing of applications, claims, and other services will be automated, with the benefit of giving customers instant policy or claims decisions and the need for fewer personnel.

Not being a digital native could, ultimately, work in your advantage as you navigate the?digital-only terrain. Since others have come before you, you can learn from their successes and do as they do while avoiding their mistakes.

?

New mindset for a new digital age

Old, top-down paradigms won’t do. A new digital age requires new ways of thinking about insurance, with a mindset that’s collaborative, focused on speed, and informed by data to innovate and update frequently and fast.

The new insurance requires a shift in emphasis to

·?????Customer service: Do people like using your website or app? Are you giving them the choices and flexibility they want?

·?????Speed to market: Can you launch faster than your competitors do?

·?????Data: How can you use yours to the benefit of customers and continually improve your products and services?

While digital companies likely already think about these questions, many traditional insurers don’t. If you’re a traditional insurer, we’ve come up with a five-step approach for designing and offering digital insurance products and services like a digital native:?

1.????Define your target customer and how to meet their needs. Using insights gleaned from data can help you define your ideal customer and write a value proposition for meeting that customer’s needs. If you’re unsure how to go about it, we suggest an intensive four-week concept-creation lab and shark-tank vetting similar to the process start-ups often use. When it’s over, you will most likely have answered the hard questions, and have a clear idea of what you should offer that customers will value most.

2.????Validate your idea with a minimum viable product (MVP). Next you’ll develop an MVP – a version of your digital product that includes only those features and functions essential to meeting a specific need of your target customers.

Starting with an MVP lets you test the product in the market and make changes based on customer feedback. To do so, you’ll need to learn development processes that are agile (for speed) and nimble (to gracefully make changes as needed). At the same time, you’ll need to manage reputational and regulatory risk for your digital arm as you do for the rest of your business, which means ensuring that your MVP is as high-quality as the rest of your products and also that it’s secure.

3.????Prioritize the customer experience. You’ve asked yourself – first – who your target customer is and what they want. Now, it’s time to figure out how to present it to them for their utmost ease and enjoyment.

Remove actions extraneous to the product’s use. Automate tasks to save your customer time and reduce errors. Try using Generative AI technology such as ChatGPT to enhance your customer service. Always consulting the data to determine what works and what doesn’t – that’s how digital natives operate.?

4.????Build a data-driven organization. Data is the key to digital success. To use data to inform your decisions and operate your business more efficiently, you’ll need to add systems and processes for gathering and analyzing data to identify patterns and trends in the uses of all your offerings. With these insights, you’ll be able to quickly and frequently improve your products and services, measure and improve the results they produce, and personalize and enhance your customers’ experiences using your product or service. ?

5.????Embrace agility: Speed, stability and scalability are essential in the digital insurance world. When the market changes or customers’ needs do, how quickly and ably can your organization respond? When customers respond to your offering, how quickly can you incorporate their feedback? True agility gives your organization the flexibility and rigor to rapidly and safely make changes that scale.

No need to reinvent the wheel

Digital-native start-ups, including insurers, have all but perfected the art of developing new digital products and services and revising them for ongoing success with customers. Traditional insurers, however, may struggle to enter the digital-only realm for want of the right processes and tools or the knowledge they need to acquire and use them.

The good news is that most traditional insurance companies are at the same starting point – so, by stepping into digital-only now, you have a better chance of getting and staying ahead of your competitors. Following these five steps – the essence of BCG’s comprehensive, product-led transformation program – can take you there. Contact us to find out how.