Welcome to the first of my series of blogs on the digital trends, challenges and opportunities facing corporates, in the financial services sector and beyond.
As executive director responsible for digital at a global asset management firm, it’s my job to keep an eye on the things firms need to know about as they strive to make their businesses digital. And let’s face it, every business now needs to be a digital business.
Over the last fifteen years or more, I’ve helped corporates to tackle some large-scale digital challenges, create and deliver their digital strategies, and leverage the value of innovative technology.
I’ll be in touch each month or so with my latest thoughts on all things digital. Here’s the first instalment. If anything I have to say resonates with you, or you’d like to know more, please don’t hesitate to get in touch.
Right onto the good stuff now and more from me next month.
The digital to-do list for insurers
Three years ago, PwC warned that insurers are being “left behind”. Its Insurance 2020 report described a breed of customer-centric, data-rich, tech-enabled competitors, who see the sector as ripe for targeting.
Since that time, digital innovation has ramped up in the insurance sector.
Much has been made of the disruptive potential of AI-powered, P2P start-ups like Guevara and Lemonade. But innovation is coming from the established players too. Aviva’s ‘digital garages’ have grabbed media attention. Axa is investing some €3 billion in technology. Allianz, Munich Re and others are also spending big on digital.
Yet PwC’s words still ring true to me. There’s much more work to do for insurers to avoid being left behind in the digital economy.
Their first priority is to fix some of the basics.
Insurers often see digital initiatives as major transformation programmes, to be managed in a waterfall fashion. But the digital world moves too fast for this.
Digital innovation needs an agile approach. This involves multi-disciplinary teams working in short sprints to develop, test and deliver new products and services at pace.
In my experience, insurance firms must also get better at user experience (UX) design. They need the cutting-edge skills and tools to glean meaningful insight into what customers want, and develop compelling experiences that meet their demands.
Insurance companies also need to be ready to take advantage of some important emerging technologies:
- Artificial intelligence (AI)
Not enough is being done to leverage the benefits of virtual agents. These automated customer support tools are a win-win. They make it easier for customers to do business with you, while reducing the cost of serving them.
- Connected cars and homes
The industry is firmly on board with black-box car insurance – despite question marks over its ability to exploit the resulting data (see below). But it’s behind the pace on digital homes.
Smart home technology can learn occupants’ usage patterns, and detect problems such as damp. As such, it offers a wealth of information home insurers can use to hone their offerings. It’s increasingly being used by utilities providers, but not yet by insurers.
Voice recognition software allows customers to access their services, accounts and policies by phone. In financial services, pioneers such as First Direct and HSBC are beginning to deploy this technology.
- Big data
AI, biometrics, and smart home and in-car tech can transform the customer experiences insurers can offer. But they also generate huge quantities of data, which can provide valuable insight into customers’ habits and demands.
The results of big data analysis can be harnessed to tailor products and communications to individual customers.
Challenges & opportunities
Success in the digital economy will depend on insurers’ ability to realise the rich potential of these emerging technologies.
But there are challenges in the way. Based on the conversations I have with insurance executives, I believe there are five key elements the sector needs to transform:
In an industry that’s been slow to come to terms with the digital world, getting these factors right will give them a vital competitive edge.
The ability to identify, recruit and retain the necessary skills will be critical. Insurers will need capability and capacity in everything from digital strategy to AI, big data, and UX design and build.
And that’s the easy part. They’ll also need to transform their cultures to embed pace and agility.
Exploiting big data means building – and securing – the systems to gather and make sense of it. It also demands sophisticated analysis skills, and the strategic ability to know what to about the results.
With digital technology continually transforming customers’ expectations, understanding their demands is more important than ever. That means knowing your customer segments in-depth; identifying what each one wants from you; then designing your propositions and platforms around their requirements.
Smart insurers are using personas to bring their customers to life for employees, ensuring that everyone in the business instinctively ‘gets’ them.
Digital technology offers insurers a more granular view of risk than has previously been possible.
Coverage is conventionally underwritten from static information provided by customers once a year. But data from AI systems, connected homes and cars and the like open up new, real-time models of risk calculation.
The core IT systems of many major corporates – in insurance and elsewhere – are 30 or 40 years old.
Layering new digital technologies on top of these is complex – but necessary. ‘Old’ tech can be no excuse for not embracing digital solutions.
Vision to reality
As the digital revolution hurtles forward, the key to success is two-fold. Firstly, create a clear vision of what your insurance business needs to be in the digital world. Then execute that vision quickly and effectively.
Achieving this will mean finding the right design and technology solutions, and working with the right partners to help you to identify and implement them.
Hope you enjoy my first blog and I’ll be back with another next month with a different theme (digital strategy!).
These are my own personal views and do not represent the views of my employers.