New technologies. New players. New products. New business models. The clamor of disruption is loud in our ears, but seeing a clear path for adapting to change and implementing new technologies to support change is hard. In their urgency, are insurers force-fitting disruption on old operating models and systems?
Technology can be both a tool and a tyrant, and the theme of this week’s Insurance-Canada Technology Conference—Technology: A Two-Edged Sword—depicted that reality. If designed, implemented, or used incorrectly, technology can divide and weaken rather than unite and strengthen an insurer’s position in the market. Recognition of this fact is increasing as evidenced in the many conversations that took place at the conference reflecting the need for more unified organizations and unified technology to support them. And the key driving force? The customer.
You and I, and the brotherhood of all consumers, enter 2016 firmly in control of our buying destinies. Since Forrester announced it was the ‘age of the customer’ in 2011, our rise has been meteoric. We are a force awakened; our expectations are high and we are emboldened by our new disruptive power.
You got the email. “We need to improve our customer experience. Our conversion and retention numbers are down. What can you do?” In fact, you got several emails and briefings from marketing and line-of-business leaders, and you were copied on a complaint from a key producer citing frustrated policyholders. You know what it will take, but how do you explain in a simple and concise way to peers that it will entail a whole new level of integration between your sales, marketing, and core systems?
Like the lives of so many celebrities and reality show families, whose relationships and daily interactions are splashed across our screens, insurers’ views of their customers present the same frustrating dilemma: sometimes they want to reach into the customers’ world and try to help influence decisions. But just like on TV, it seems today’s insurers can look, but aren’t actually touching their customers. True customer engagement continues to evade even the savviest of carriers.
My role at EIS Group allows me to attend a lot of industry events throughout the year. Most are focused on technology, innovation, and change, but only a select few deliver the level of value provided by the annual SMA Summit.
I left this year’s Summit with new insights and ideas, so I am sharing my “top 7 takeaways” in this blog.
“Technology is at war with the insurance industry, but insurance doesn’t know it yet.”
These words by Steve Mariano, CEO of Patriot National, in his keynote at the recent ITA LIVE conference stirred attendees and promoted vigorous discussion and post-event commentary. No doubt his statement was intended to provoke and well it should.
Mariano did not mean that insurers are fighting to implement or utilize technology solutions (although many of those with legacy core systems may feel that way). Instead, his point is that insurers are in a widening battle with technology giants such as Amazon, Google and Apple for their traditional markets. Flush with cash and high market valuations, these technology titans have declared and undeclared interests in parlaying their technology and customer connections into premium margin.
“Who’s afraid of the big bad wolf?” asks the popular nursery rhyme. While it's hardly surprising that Google is poised to pilot its auto insurance comparison shopping site in Q1, given the hints and speculation, it's still an ominous portent. Forrester analyst Ellen Carney describes this development as having “big implications for insurers.” However, the question this news asks insurers might be better framed as “Who’s afraid of the big bad wolf pack?” For as big as Google is, it is not a lone wolf.
The overarching threat for insurers is disruption of the prevailing distribution ecosystem by new entrants. Speculation about other entrants includes Amazon and Apple, but a host of interested companies—some already active, such as Overstock and Walmart—when considered together have the power to change insurance distribution. Distribution is currently a crowded space of agents, brokers, aggregators, banks, retailers, exchanges, and other parties. A recent Accenture Global Research study quantified the threat as two-thirds (67 percent) of insurance customers who would consider purchasing insurance products from organizations other than insurers, including 23 percent who would consider buying from online service providers such as Google and Amazon.
As we embark on a new year, I’m reflecting on conversations I’ve had in the past year with many industry thought leaders and insurance executives who have opined about the future of insurance. I’m also pondering how much was written about the innovations and market disruption from technology advances (e.g., digitalization, the Internet of Things, big data, mobility etc.) and the shift in consumer experience from companies such as Amazon.com, Apple, and Google. The great news for 2015 is that opportunities exist to innovate like never before, in both the product space and the consumer experience. I’m not going to rehash all of those opportunities, though, since I’d rather talk about the number one barrier to achieving them—the hindrance of legacy systems and the aversion to the risk of replacing them.
Remember when the model for engaging with consumers was as simple as sending out enrollers with disconnected laptops and that was considered high tech? How times have changed. It's now a consumer-centric environment where consumers expect to choose how, where and when to interact. In a consumer-centric environment expectations run high, the long term success rate of group-based carriers and voluntary insurers depends on the ability to interact in an omnichannel environment – a bar set particularly high by the retail industry. The fact is, given the sheer range of channel options and product choices that exist in the marketplace today, insurers have a tremendous opportunity to build a strong connection with consumers.