Few industries face as much disruption as insurance. The scale and pace of insurance disruptions continues to expand, creating both opportunities and challenges for incumbent insurers and insurtech startups.

Customer demands are changing too, driving insurance companies to change their approach to everything from distribution to claims handling to underwriting. Continued pressure on the commercial P&C market calls for new approaches as well.

Customer Insurance Disruptions Create Opportunities

Customers are the No. 1 source of disruption for P&C insurers today. Customer expectations have changed rapidly in recent years, and today’s customers expect a personalized, on-demand insurance experience that provides tailored coverage.

To compete in an industry disrupted by changing consumer expectations, insurance companies will need to understand customers’ desires and meet them with relevant products and services.

For instance, 61 percent of insurance customers prefer to check the status of insurance applications online, say Thomas Brady and Alexandra Sutton at Board of Innovation. Insurance companies may find their existing technology infrastructure to be more of a hindrance than a help; those that succeed in meeting customer demands do so by centering the customer experience in their own digital transformation efforts.

Think relationships, not robots

Another way to center the customer experience is to use digital technology to build an ongoing relationship between the insurer and customer.

By expanding the range of touchpoints between customer and insurer, P&Cs can ride along with insureds in their vehicles, be present in their homes to warn of potential damage, and take other steps to build a strong relationship based on a multiple experience model.

“Multiexperience replaces technology-literate people with people-literate technology. In this trend, the traditional idea of a computer evolves from a single point of interaction to include multisensory and multitouchpoint interfaces like wearables and advanced computer sensors,” writes Kasey Panetta at Gartner.

She describes how pizza chain Domino’s embraced multiexperience customer service with autonomous vehicles that have sensors to allow customers to track their delivery. They also incorporate smart speaker communications for ease of ordering. Insurance companies can use similar methods to reach customers, making it easy to change coverage or file a claim from a smart speaker in the home or through a vehicle’s onboard computer systems.

Leverage the relationships you have

When it comes to centering customer experience and demands, insurtechs often have an advantage. Insurtechs can begin their life in insurance by meeting customers where they are today, rather than by changing ingrained but outdated habits. For established P&Cs, however, winning the customer game requires a different approach.

“Unlike new technology-based startups, incumbent insurers have millions of customers and need to build engaging propositions that create stickiness,” says Andy Masters, insurance partner at Deloitte. When insurance companies focus on building loyalty among their existing customer base, they can improve retention and meet customers exactly where they are.

By putting the customer relationship first, insurance companies can seize one of the biggest sources of disruption and use it to help them grow and thrive in the coming decade.

To Grow Through Disruption, Change Your Path

Recently, the insurance industry became aware of a sea change among incumbent insurers. Rather than positioning themselves to handle claims when they occur, insurance companies are increasingly focused on ways to prevent losses from occurring at all.

This interest in prevention is likely to persist into the future, changing insurance practices. Risk prevention will take a leading role, eclipsing risk management as a way to protect insurers’ bottom lines and control premium increases by avoiding losses entirely.

Currently, no sector of P&C insurance offers a better example of the need to focus on risk prevention than commercial insurance. In 2019, commercial property insurance saw rate increases between 5 and 10 percent; some companies saw increases of 50 percent or more, says Casey Soares, senior vice president and property specialist at Woodruff Sawyer.

In response, insurance companies have scrambled to address a firming market, examining their own underwriting more closely and changing their approach to risk prevention and mitigation, she adds.

Rates for commercial P&C coverage will keep rising in 2020, predicts Brian S. Wanat, chief broking officer at Aon PLC. And since few new insurers have entered the commercial field, “there’s really no new markets that are looking at this as an opportunity and cutting rates.”

A firming commercial market is likely to change customer behavior as well. Customers will seek to avoid losses in order so as not to have to pay deductibles or increased premiums that result from those losses, says Joe Peiser, executive vice president and global head of broking at Willis Towers Watson. Investment in analytics and similar loss prevention tools can help insurance companies meet these customers where they are, creating loyalties and securing business.

The vast amount of digital data available today allows insurance companies to spot trends and respond to them more quickly, if they are equipped to do so. Embracing digital disruption is one way an insurer can position itself to take advantage of early trendspotting.

“Insurers will need to adopt an ecosystem approach that involves partnership and outsourcing, as well as in-house teams. It will take a lot of effort to transition from a legacy position to flexible, open architecture,” notes Andy Lees, a partner at Deloitte. Insurers who make the transition effectively, however, will be able to spot promising trends and respond to them more quickly, while competitors are left behind.

Disrupting Distribution Before It Disrupts You

Insurance disruptions to date have been driven by changing consumer demands and affects underwriting and loss prevention. Distribution, too, stands to change greatly over the coming year.

Currently, about 69 percent of insurance executives believe that changes in distribution channels will produce the greatest disruption to the insurance industry, say Jamie Yoder, Anand Rao and Stephen O’Hearn, lead authors of the PwC report, “Insurance 2020 & beyond.”

“Most insurers have invested in digital distribution, with some now moving beyond direct digital sales to models that embed the company’s products and services in people’s lives (e.g. pay-as-you-drive insurance),” they write.

Yet addressing disruption in distribution isn’t as simple as assuming that all customers want to interact online. That’s because customers aren’t merely switching from analog to digital insurance communications. Rather they’re diversifying their approach, seeking to engage digitally and with agents or customer service representatives, according to a 2018 Facebook survey, writes the team at Insurance Journal.

Engaging productively with distribution disruption, therefore, requires insurance companies to adopt a both/and approach. Strengthen digital channels and tools, but use them to enhance the work already being done to reach customers, address claims and improve underwriting.

Improve claims handling by going digital as well

A digital distribution model can also help insurance companies improve the way they triage claims, meeting demands for quick, personalized customer service. A predictive analytics system built into a P&C’s digital distribution platform can improve claims handling, saving time and money.

Predictive analytics tools can help insurers do everything from predict claims and prevent losses to spot which customers are likely to leave, says Igor Bobriakov, data scientist and founder of Data Science School. When these tools are incorporated into an insurance company’s approach, they provide powerful new ways to understand customers and manage the business of insurance.

Use digital distribution to boost data analytics

Insurance companies are also embracing the increased data that comes from these digital connections — and the analytics that data makes possible.

Insurance has always been deeply concerned with data analytics. The ability to understand and apply data and conclusions gleaned from it lies at the heart of underwriting.

Yet recently, “as insurers have sought to become more relevant to their customers and more efficient, they have realized the strategic importance of their data investments,” says Keith Stonell, managing director of EMEA at Guidewire Software. Insurers are embracing data analytics to help improve customer relationships, reduce time and costs in claims handling, improve underwriting and eliminate fraud.

In other words, the answer to insurance disruptions may be disruption itself. As customer demands, changing risks and other factors shake up insurance, insurers stand to benefit by embracing the selfsame digital tools that threaten disruption, turning them instead into an opportunity.

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