Insurance Carriers Must Evolve Along with the Digital Behaviors of Consumers

It’s been said over and over again that the insurance industry is slow to change. This sentiment has been constantly repeated because it rings true. According to McKinsey & Company, the insurance industry has lagged behind other industries in terms of the shift into digital technologies. This makes the insurance industry ripe for disruption.

Digital disruption is a serious matter for insurance carriers. If they don’t evolve along with the digital behaviors of their customers, carriers are putting their business at risk. This isn’t an anecdotal statement. It’s been proven historically that no industry is immune.

Research shows that since 2000, digital disruption has been the cause of 52% of companies in the Fortune 500 having either gone bankrupt, been acquired, or ceased to exist. That shockingly high percentage shows just how huge of an impact digital disruption brings to an industry.

Most in the insurance industry expect massive disruption

Most leaders in the insurance industry are aware of accelerating digital disruption. When asked whether they anticipated moderate or massive digital disruption in 2016, 53% of C-level executives said they do.

When surveyed in 2017, 65% of executives who work for companies with a digital strategy in the broader financial services sector reported that they have experienced disruption, and 77% said they expect disruption in 2018.

These figures tell three stories. One story is that digital disruption has begun in the insurance industry. The time is over for waiting and speculating. It’s here. Another story is that the expectation of greater digital disruption is rising. Leaders are becoming more aware of the fact that greater disruption is on the way.

Yet a final story is that not everyone is prepared. It’s astonishing that only 77% of C-level executives expect disruption in 2018. What does it mean that the percentage is so low? It very likely means that their companies aren’t being truly prepared to evolve along with the digital behavior of consumers.

The expectations of customers are changing

Much has been written about the changing expectations of customers in other sectors such as retail. They research products before they buy, while they are buying them, and after they’ve bought them. Customers are more price sensitive than ever, want frictionless transactions, and demand access and service at any time of the day or night across all of their devices.

These changes in customer expectations are impacting the insurance industry in exactly the same way as they have in other sectors. According to a survey conducted by PwC, 72% of customers surveyed used some form of digital research before buying insurance. Among other things, they compared prices online or looked for information on social media that would help them make a decision.

And, customers are price sensitive. They either don’t understand, or they underestimate, the value of insurance to the point that insurance has become a commodity to them. As evidence of their price sensitivity, and how embedded digital is in the average customer’s mind, 67% of them are willing to have a sensor attached to their car or home if it would result in a reduction in premiums.

Additionally, 50% of customers are prepared to provide their carrier with additional personal and lifestyle information to enable the carrier to seek the best deal on relevant services for the customer. Customers are even willing to go so far as to use wearable sensors that feed health information back to their health insurance provider.

The insurance industry can use the fact that it lags behind other sectors in terms of leveraging digital to create new opportunities. By examining what worked and what didn’t work in other sectors, carriers can implement best practices while avoiding common mistakes.

Don’t overlook the claims process

When something goes wrong and a customer needs to make a claim, their stress level is high. This is when the evolved customer is even more serious about wanting digital services. They want a simple way to file their claim and they want a speedy claims process that also allows them to track the status of their claim.

To satisfy this need for digital access, carriers must give customers the ability to file their claims electronically by filling out forms on their mobile devices. Customers must also be able to upload documents, receipts, and pictures. The new customer is perfectly satisfied without ever having to speak directly with a claims adjuster.

Embrace digital or lose customers

One of the major threats that carriers face while the industry is being disrupted by digital technology is losing customers. That’s because customer satisfaction, on a global scale, is surprisingly low and declining. Only 29% of insurance customers are satisfied with their current provider and only 16% said that they would definitely buy more products from their current provider. That’s according to Accenture’s 2015 Global Consumer Pulse Research report that surveyed more than 13,000 customers in 33 countries.

The sinking level of customer loyalty can also be attributed to a claims process that doesn’t meet the customers’ needs. Failing to satisfy customers during the claims process can be fatal. That’s because more than 30% of customers who endured a bad claims process experience switch to another carrier within 12 months of the incident.

However, the perceived digital threat is really an opportunity to decrease customer churn. While it is true that only 15% of insurance customers are satisfied with their carriers’ digital experience, the carrier can do something about that because the carrier is in control of that interaction. Improving the digital experience leads to improved customer acquisition and increased customer loyalty.

Final thoughts

Simply put, digital disruption is the change that occurs when new digital technologies and business models affect the value proposition of existing services. The successful carriers will be the ones that understand that digital disruption is more than a catalyst for unrelenting change.

It is the foundation of new business strategies that help them evolve at the same rate their customers are evolving. Those carriers will embrace the transformation as the new business-as-usual and use digital technologies to accelerate their growth.