“In the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment.”
Although Charles Darwin is often attributed for this quotation, there is no concrete evidence to support it. Regardless, this holds true in the context of a technology led disruption we are witnessing in almost every industry. While Airbnb has introduced the concept of sharing and disrupted the hotel industry, we have seen Uber change the rules of the game for cabs and Simple’s foray into banking industry has redefined the online banking experience. Even Facebook to an extent can be credited with causing a disruption in social media. The list is long and examples aplenty.
Insurance industry is not immune to disruption
For long, the industry which has seen insurers compete against each other is now at the forefront of a massive paradigm shift – and digital is driving this. Digital is not just changing the needs, wants and desires of a consumer but powering an attitudinal shift. There is a shift towards customer centricity that has resulted in customer driven engagement and empowerment. Digital is the rider on which consumers are not just demanding what they want, but how they want it. And this is forcing insurers to offer personalization as a service.
Customer experience serves as a key differentiator in an industry where the core product offering essentially remains the same. Insurers for long have neglected this aspect and that has left the consumers wanting. Technology led start-ups are focusing on enhancing the customer experience. Companies like CoverHound etc. which are online insurance agencies are offering personalized and transparent insurance solutions. Others like Comparenow simplify insurance shopping by serving as a one stop shop for all insurance needs. Then there is the digital powerhouse Google which has launched an auto insurance shopping site in the U.S. in addition to getting itself licensed to sell insurance services.
Insurers are adapting to the constantly changing market needs
Traditional insurers understand that business as usual will not cut out against the new reality that dawns on the insurance industry. The industry landscape is changing and insurers have turned their focus on –
- Modernizing the legacy applications as these aging systems are holding businesses back by presenting integration roadblocks to support new initiatives while being costly to maintain
- Rationalizing the application portfolio to lower costs, streamline processes and to increase operational efficiency
- Adopting a rapid application development model to accelerate go to market time for new products and drive customer engagement
- Analyzing the massive consumer data to derive insights from across the Insurance Value Chain – From product definitions, to pricing, claims handling and marketing and distribution
But are the insurers doing enough?
The emergence of digital as a new insurance channel threatens to cut out agents and intermediaries, and has the ability to cater to the self-servicing needs of the consumer. Insurers are faced with start-ups and companies that are empowering the consumers and coming up with customer driven engagement models. Google for example has a ton of data on consumers’ habits, preferences, likes and dislikes and can leverage these details to price the insurance products. Another example is the pay-as-you-drive model (PAYD) that prices insurance premiums on the distance a vehicle is driven. Customers, backed with tons of freely available online research and information, desire personalization. They want cost effective, customizable insurance at their own convenience.
This changing insurance landscape makes customer retention and acquisition a real challenge for the traditional insurers. The emergence of new players who have leveraged the digital channel to come up with innovative business models is disrupting the seemingly immune insurance industry. The ability to rapidly respond to the change will be the key determinant of survival and growth. Insurers need to become proactive, adopt new technologies, and reinvent their business models to gear up for a dynamic, technology-enabled future. To put it literally, evolution is the norm and not an exception. Insurers must evolve or risk becoming a victim of the digital disruption.