Digital Distribution: A Guide for P&C Professionals Who Don’t Know Where to Start
Property and casualty insurers aren’t shying away from digital distribution. “[F]our out of five insurers either have, or are planning to set up, wholly digital sales processes in which humans are involved only when customers need advice,” Accenture global insurance industry senior managing director John Cusano reports.
But taking digital distribution from concept to reality still poses major challenges for many P&C insurers.
Here, we look at some of the biggest challenges of implementing a digital distribution strategy and how to overcome them.
Everyone’s Going Mobile
In a 2013 article for Wired, Christina Bonnington predicted the world would contain 24 billion connected devices by 2020, and that the Internet of Things would result in people doing ever more tasks from their smartphones.
We got there early: Statista estimates the world of 2018 already contains 23.14 billion connected devices and that the number will be more like 31 million in 2020. And more of these devices than ever are mobile devices.
It seems as if the insurance industry only just began to embrace the opportunities afforded by digital technology when customers’ attention switched to this highly connected, primarily mobile world.
Today, customers “expect the same intuitive experience from their insurance carriers as they do from their favorite mobile app,” says Rahim Kaba at OneSpan. And they’re not the only ones. “Even insurance agents are demanding better digital capabilities from insurers to increase their ease of doing business,” Kaba says.
Putting Numbers to the Scope of Mobile’s Impact
Mobile is an essential consideration for insurance companies, according to Andrew Sheridan at DialogTech, who cites several statistics that illuminate the opportunity available:
- 40 percent of customers’ time researching insurance was spent on mobile, and 51 percent of these customers purchased insurance as a result of their research.
- 25 percent of insurance shoppers do all their buying via their mobile devices.
- 66 percent use a specific insurance company’s app.
Yet going mobile poses some challenges for insurance companies. For one thing, customers expect to be able to do everything from pay premiums to file claims, get driving tips or find a repair shop via a mobile app. That’s a lot of work for an app to do — and the more an app does, the slower and thus less appealing it is likely to be
Another challenge is the integration of older technologies with new ones. As Parmy Olson notes at Forbes, older telemetrics devices like Progressive’s Snapshot are starting to give way to smartphone apps that perform similar tasks, measuring speed, distance and other driving-related factors that can affect premium calculations.
These apps can seem more convenient to customers, but they can also make certain measurements or calculations more difficult. For instance, telemetric devices installed in the vehicle itself can more easily detect a crash and call for help, says Jim Levandusky, vice president of telemetrics at Verisk Analytics.
Embracing Industry Shifts
One solution? “Collaboration with the disrupters,” says Trevor Lloyd-Jones at LexisNexis Risk Solutions. Embracing mobile tools like telematics can make mobile apps easier for customers and more effective for insurance companies, and when these tools are approached through software as a service (SaaS) or similar providers, concerns about security or analysis are often addressed as part of the platform.
Companies that dismiss disruptors in the insurtech sphere do so at their peril, says Nikolaus Sühr, co-founder and CEO of KASKO. The era of relying solely on historical data may be coming to an end. “Disruption in other industries is actually changing user behavior and the nature of risk, so there is no relevant historical data anymore,” Sühr writes.
When moving into mobile for customers, agents or both, don’t be afraid to A/B test mobile apps, try new things and to innovate, says Amir Rozenberg, director of product management at Perfecto. While experimentation must account for the tight regulatory world insurance companies inhabit, trying out options in the mobile sphere allows P&C insurers to better understand how their customers use mobile — and how the company can use what it learns to attract and keep better customers.
Within this process, however, it’s important to keep mobile in perspective. “Even with this trend, companies need to ensure a mobile app supplements the overall experience and doesn’t dominate it,” says Rodney Johnson at Kony.
One Size Doesn’t Fit All
“With customers using more devices in more ways, there are new options for customer engagement,” stated a recent Incom Business Systems white paper. There are also plenty of challenges. Mobile devices feel personalized to customers, and with companies in other industries extending that personalization to their apps, insurance companies are feeling the pressure to personalize, as well.
A hallmark of in-person or traditional channels has been their one-size-fits-all approach to customers, according to Shashank Singh in an article at Insurance Nexus. Many P&C insurers have attempted to transfer this approach to the digital world, only to discover it doesn’t work.
Data and analytics offer insurers an unprecedented opportunity to understand and respond to each customer as an individual, from recommending products to calculating risk.
Digital distribution can also make it easier to capture a growing segment of the P&C insurance market that has changed its behavior as it finds itself priced out of coverage. “Re-thinking distribution is key to successful inclusive insurance,” says Peter Wrede of World Bank Group USA. “Low distribution costs make insurance affordable for low-income people.”
A 2017 article by in The Street noted that 18 million adults in the US currently cannot afford auto insurance, so they go without, often turning to public transportation or rides from friends instead. As a result, “personal automobile insurance is in a crisis,” said Dave Delaney of Owner Operator Direct. “Rates have been increasing steadily since 2011 and there is no end in sight.”
By turning to a digital distribution system to reduce costs, however, insurance companies gain the opportunity to make coverage more affordable, recapturing some of the 18 million customers who currently believe auto insurance won’t fit into their household budget.
Lack of Support Systems
Personalization of the digital customer experience, leveraging tools like mobile apps, presents a profound opportunity to understand and respond to customers’ needs better than ever before, said Ash Hassib, Senior Vice President of Insurance Solutions at LexisNexis. But “data availability isn’t the issue,” said Hassib. “It’s how you use it to underpin sustainable and profitable growth that’s the real challenge for insurers.”
And for many insurers, this challenge arises the moment they try to use that customer data within their current organization.
“Insurers have focused on digitalizing the front end, with insufficient focus on the systems that support distribution,” noted a May 2017 report from the Insurance Governance Leadership Network. Additional challenges in retention have resulted, with insurance companies noting that customers leave because the system doesn’t provide adequate support for their experience.
Customers who use multiple channels to communicate with insurance companies are more likely to face problems caused by insufficient systems inside the organization itself. Perhaps this is why, relative to other industries, insurance company employees rated their companies 9 percent lower on providing a high-quality customer experience, according to Tom Bobrowski at The Digital Insurer. P&C companies were also rated 8 percent lower than average at “good cooperation between functions” allowing the company to meet the customer’s needs effectively.
One option is to take a hybrid approach, says Sasi Koyalloth in a Wipro Ltd. white paper. A hybrid approach focuses on incorporating human agents into the digitization process, focusing on giving agents and employees the digital tools necessary for seamless communication throughout the organization.
Regardless of approach, “a single view of the customer is crucial,” says Robert Paterson at Afinium, noting that software as a service (SaaS) providers already exist with the tools and support needed to help P&C insurers transition to a single platform for managing information.
And the systems’ cost needn’t be onerous. “Another key driver for adoption of SaaS solutions is its use in developing pricing models that can be directly related to system usage,” says Paterson.
The switch to digital is now or never for P&C insurers. Working with knowledgeable insurtech providers can help companies address concerns about data security, analysis and customer experience, allowing insurers to take full advantage of the digital world to build more personal and long-lasting customer relationships.
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