Digital Disruptors of the Insurance Business Model, by Sameer Dhanrajani

Ernst & Young released a report titled “Insurance in a digital world: the time is now.” I found that it had a number of useful insights. Here are some excerpts:

Insurance companies face conflicting challenges. They must contend with continuing instability in financial markets, low interest rates, increasing acquisition costs, changing regulation and catastrophic losses from ongoing natural disasters. Yet the global insurance market shows unprecedented growth potential, whether it is the sizable global population moving into retirement with greater life expectancy and health protection needs or the massive emerging markets of South America, Asia and Africa demanding the full suite of insurance products. But the toughest challenge faced by the insurance sector is the one that is transforming consumer behavior and business models — digital technology.
Digital is a new market force that is driving a massive change in consumer expectations. It will require a different set of skills, culture and measurement. Industries such as telecommunications, consumer products, and media and entertainment have already harnessed digital to attract and retain new customers. It is time for insurers to evolve and respond: they cannot afford to be on the sidelines of the shift to digital.

For the report, EY conducted a survey of insurance companies and derived seven key findings from it:

  1. Insurers acknowledge their current low levels of digital maturity and the need to take action.
Insurers trail the entire digital spectrum: customer engagement, use of analytics and adoption of mobile and social media. Almost 80% of respondents do not see themselves as digital leaders, believing instead they “only play the digital game” or are “still learning to use digital capabilities for a competitive advantage.”
  • Companies have high digital ambitions — but are they grounded in reality?
Insurers aspire to future digital leadership; however, attaining their goals will require significant — and rapid — improvement to close the current gap. By their own admission, more than two-thirds feel they have delivered some easy quick wins, but they have not made transformational progress to realize their ambitious digital objectives.
  • Insurers are holding themselves back.
Internal factors — legacy technology, slow pace of delivery and culture constraints — not the external market, are hindering progress. Focusing on key enablers such as culture and innovation will release significant future value and enable companies to better grasp digital business opportunities as they arise.
  • It’s all about retention through improved customer experience.
The two biggest drivers of digital strategies are “enriching the customer experience” and “regaining more direct control of the customer relationship” — far ahead of “attracting prospective customers and increasing sales.” While the cost of acquisition continues to rise, retaining existing customers is an increasing necessity and should be a critical and measurable benefit of any improvement in the customer experience, digitally enabled or otherwise.
  • Distributors are digital customers, too.
Respondents consistently cite intermediary and agent channel strength or resistance as one of the top three inhibitors in implementing their digital strategy. But distributors face the same challenge as insurers — respondents believe that “improving the efficiency and quality of interactions with customers” will be the most important use of digital for intermediaries and agents over the next three years. Sharing the benefits of investment in digital and communicating a clear mutual value proposition to deliver a better customer experience will help to minimize channel conflict.
  • Analytics are critical to digital success.
With technology changing so rapidly, insurers need new skills to exploit the digital challenge. Analytics capabilities (segmentation, customer data and predictive modeling) emerged as the most in-demand skill set in both sectors (and most strongly in non-life), followed closely by technology and marketing capabilities. In our experience, many organizations do not deliver analytics capabilities early on, but they are a prerequisite for extracting maximum value from digital investment.
  • Insurers need to embrace the mobile and social media wave.
Current focus on mobile products and services is limited. But with mobile and tablet use growing exponentially, neglecting mobile is turning one’s back on the future. Similarly, insurers could be taking social media more seriously, recognizing its value as a relatively inexpensive marketing tool and a means to engage with and influence skeptical, digitally savvy younger consumers.

I encourage you to check out EY’s full report. Make sure you also note EY’s five practical steps for creating digital business models. Digital technology is a difficult challenge for today’s insurance companies, but working strategies and new business models are transforming laggards into leaders and influencing consumer behavior.

Let’s chat afterwards.

Opinions expressed in this blog are of the author and may not represent Cognizant’s point of view.

Sameer Dhanrajani

Sameer Dhanrajani is Business Leader at Cognizant Technology Solutions. In his capacity, Sameer is responsible for leading end to end business spheres…

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Originally published at on January 29, 2016.