The importance of technology in mature industries
The current global health crisis is impacting all businesses; each individual firm is facing different challenges based on their own special circumstances. In this piece, we explore the impacts of COVID-19 on the insurance industry and how technology and digitisation may allow the sector to navigate the turbulent waters we all face.
The insurance sector is under particular strain now due to its triple character — as employers, capital managers, and the payers of claims. Now more than ever, the industry must leverage technology to its advantage.
Automation and customer engagement
The recent Gartner report predicts that, by the end of the year, 85% of all customer relationships will be fully automated. In the same vein, EY states that more than 80% of customers are willing to use digital and remote contact channels (including web chat, email, mobile apps, video or phone) in place of interacting with insurers via agents or brokers.
Importantly, this finding was published last year; these figures are likely to be substantially higher now. These compounding trends are a testament to the pivotal role of technology and innovation in the insurance sector.
Our research indicates that the insurance sector as a whole has been suffering from an ailment common among other mature industries. Managers afflicted by this malady perceive the industry as stable, and the slow growth allows them to be complacent and ignore emerging technologies and changes in consumer demands.
Technology, the disruptor of worlds
We observe that this market opportunity has already been identified by some. As a result, we see a booming market in Insurtech, a market expected to grow 41% annually between 2019 and 2023, in stark contrast to the negative growth of 0.8% for the overall insurance sector in Europe predicted for this year.
These new competitors, who are embracing emerging technologies, automation, and innovation with gusto, are poised to grow market share, and both create and capture value. This will result in a fundamental replacement of established players with new emerging competitors who are more attuned to customer needs and to new ways of operating.
It is clear to us that long-term success involves integrated digital channels, modernising customer experience, and embracing innovation.
As a result of this pandemic, we are observing companies in other sectors rethinking their customer engagement strategies, rapidly adapting how they operate and embracing technology like never before.
It is now apparent that insurers must accelerate their digital transformation to process claims faster and allow sales personnel access to the relevant documentation while working remotely. It is also essential to be capable of attracting new clients using digital technologies and optimise policyholder interactions in the virtual space.
We predict that some players will take this opportunity to accelerate business innovation, using this crisis as a catalyst for a broader shift from physical to digital channels and products.
The world turns, but businesses evolve
Customers now realise that we all can do much more from the convenience of their homes. Clients across all sectors are able to do business online, and now fully aware of the convenience associated with doing business remotely. These expectations will not be as temporary as COVID-19.
As a result, the sector may experience a similar revolution analogous to what Amazon has done to the high-street, or what Netflix did to Blockbuster.
It is clear that coming out of this crisis, the insurance industry will look fundamentally different.
The ones who modernise first, will obtain the first-mover advantage and gain a competitive edge, which will be sustained after long after the present crisis wanes. The ones who fail to rejuvenate may enter a downward spiral which may ultimately cause their demise.