Why the insurance industry is ripe for digital disruption

by Startacus Admin

 

Callum Rimmer, founder and CEO, By Bits shares his thoughts on why the insurance market needs to change - for the benefit of both insurers and customers alike

The last 12 months have seen a massive reduction in travel and, as a result, highlighted the urgent need for the insurance industry to follow in the footsteps of retail banking and provide consumers with a much more dynamic and engaging digital experience. But the insurance industry is inhibiting its own innovation through inertia. So, how can the market be improved - for insurers and customers - and what’s the impact in doing so?

The stories of Kodak and Nokia are 21st Century fables with a clear learning around adaptation and evolution. This is something the insurance industry needs to be cognizant of as we enter a post-pandemic world. 

This is because the last 12 months has forced every sector to review its operating models and approaches to customer experience in light of rapidly changing customer needs and evolving cultural behaviours. This is particularly pertinent when it comes to motor insurance as global lockdowns, social distancing measures and sweeping changes to working habits have led consumers and insurers alike to reevaluate the value of traditional policies.

Ripe for change

But let’s not kid ourselves, the insurance industry has been ripe for change for years - long before COVID became part of the vernacular. Motor insurance, and in particular its pricing models, are seen as opaque and unfair, and because it is mandatory if you own a car, motor insurance still feels like a tax rather than a purchase decision. According to this 2018 study by the Association of British Insurers, seven in ten (70%) insurance customers agree that, no matter what they do, their insurance premiums seem to go up every year.

There is no doubt consumers are overwhelmingly dissatisfied with the level of service they are receiving so the industry is at an inflection point. 

Catch-up or fall short

Customer expectations have increased markedly. People expect insurance products and services to measure up to the experiences they enjoy with their other consumer purchases like in banking, retail or fitness. Instead, what they’re getting is cumbersome and one-dimensional products because the insurance industry has been slow to adapt to technology innovation. 

Insurers should already be considering how to embrace consumer trends in their products for both the short and long term. In many cases, this means catching-up to what is current and urgently putting measures in place to scale and pivot their products and services to respond to ongoing changes in driving habits and digital consumption. Insurers simply won’t be able to survive if they continue to treat customers as they have done up until now - they can’t afford the shockingly low retention rates that they’ve got away with until now.

The innovation mindset

Traditional players and those insurers unwilling to meet the speed and scale of change are not going to retain the level of customers they've had before, which then by proxy, means they will need to spend more money to go out and win customers back. The answer lies in evolving to offer a product that will retain customers and evolve the wider industry at the same time. As an example, we’ve seen years of insurers concentrating heavily on achieving a high-ranking on price comparison sites, which has led to a situation where, largely, the industry has a commoditised product with little differentiation or USP.

Obsessed with price comparison sites and a race to the bottom on pricing, insurers have neglected to see the bigger picture. Many simply haven’t developed the right mindsets, cultures and approaches to respond to changes in consumer needs and to get on the front foot through innovation. And that’s why, rather than focusing on getting ahead of new (and some would say inevitable) technology innovation and collaborating on solutions to potential challenges, some insurers and legal firms appear to be focused on stifling and delaying progress. 

Inhibit or innovate?

We're at a nexus point with car technology of changing user behavior, changing customer expectations and changing technology. And right now, progress is being held back because of the insurance industry.

Businesses in the insurance industry need to make a choice and pick a side - they can either be an inhibitor or an innovator but, in the long-term there’s only going to be one winner.

 

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Published on: 11th March 2021