The next ‘D’ – from deregulation to digital disruption

When I think of the last time financial services, and specifically the insurance industry, was ‘disrupted’ I revert to the period of deregulation in the 1980s.

In the 1970s and before deregulation, the insurance industry was heavily concentrated with the five largest life insurance firms accounting for more than 85 per cent of premium income.

While the term disruption wasn’t as common, the legislative and economic events that took place at that time to open up the financial markets to competition definitely resulted in greater convenience and choice for customers. The desired outcome of disruption, after all.

Fast forward a few decades and the industry stares into another period of disruption. This time around, the catalyst – the ‘D’ – will be digital and data.
In years to come, we will look back and see this was the time for evolution. It will be the period when data provided the industry new ways to offer life insurance and digital provided customers new ways to consume it.

Insurance providers will be impacted in ways not dissimilar to the demographic trends changing other parts of the financial services industry. An example is research showing digital natives – especially Millennials – being very comfortable and more willing to invest in funds and businesses relating to technology start-ups. Because they’ve grown up in a digital environment, it feels familiar and they see it as a natural part of doing business.

Similarly, in insurance we’re seeing the emergence of more peer-to-peer insurance models, sharing-economy and collaborative financing approaches such as crowd-funding. Again, Millennials and other digital natives have grown up with these funding and business models, and this will only be accelerated by advances in digital technology and data analytics.

Despite being non-advised, the prudent use of digital channels coupled with data analytics is tapping into unmet consumer needs through convenient and hassle-free technology, while increasing product choices and adding transparency to the customer service experience.

It is these trends that insurers need to be aware of and find new ways to deliver to.
Another significant change to our industry is the emerging use of big data and machine learning to improve the customer experience in underwriting, claims and distribution.

There is an abundance of use cases that will fundamentally change how we offer life insurance, and how customers will seek and experience our products and services.

At its core, artificial intelligence, including machine learning and cognitive computing, can help us gain a better understanding of insurance risks by tirelessly crunching through huge amounts of data to identify key trends and insights.

The predictive and probabilistic analytics capabilities of this has the potential to change a 10-page form in the underwriting process to one page, or even less. It can support customer acquisition strategies by identifying life-stage changes and highlighting a family’s need for life insurance. And we can follow the lead from our general insurance peers by developing apps to accelerate the claims process.

For example, insurance start-up Lemonade recently announced that customers would be able to use its app to purchase a home owner’s insurance policy within 90 seconds, and that most claims would be paid within seconds.

Data analytics and digital technologies can also enable the industry to operate at an elevated level. For example, most industry participants have already moved on from simply talking about the benefits of each type of life insurance product, to talking more about the added benefits of providing health and wellbeing solutions to their customers.

Finally, customers are increasingly seeking multi-dimensional value from insurance products and services.

While there is momentum towards adopting digital technologies, we still need to actively drive utilisation by developing new applications for more insurance use cases. There are significant opportunities to achieve mutual customer-business benefits by integrating digital technologies into the customer offer, as well as actuarial pricing, underwriting and claims.

Just like ‘D’ didn’t stand for ‘doom’ when it came to deregulation in the 80’s, neither will it spell out the death knell of the insurance industry when it comes to the disruptive potential of data and digital.

On the contrary, it’s an opportunity for customers to seek out more convenience and choice.

It is therefore critical for all insurers to innovate from within by developing ‘intrapreneurs’; employees with the skill-set to spot and sense emerging trends, identify corresponding opportunities and influence their integration into the organisation’s strategy planning and execution.

At CommInsure, one of our priority investments is our life application and underwriting program, which will deliver a market-leading digitised life insurance acquisition model. It will be facilitated by a simple and seamless process that will support all our distribution channels and segments and is designed around our customers’ insurance needs and preferences.

Most importantly, data and digital will only be disruptive when dedicated to solving a pain point.

Life insurers with the strategic vision and scale to invest in digital technologies and analytics platforms will be the ones who deliver (yes, I just snuck in another ‘D’) the future to customers.


Franco Crapis, head of life product and strategy, CommInsure

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