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Adapting to a changing industry

Ahead of DIA Prime Time in November 2020, Modern Insurance spoke to Reggy de Feniks, DIA, to discuss the four key post-Covid trends that insurers need to be aware of. Plus, he examines what impact the pandemic has had on customer engagement strategies and how companies need to adapt their digital strategies in order to move forward. 

Q. Back in June you released a whitepaper detailing the four key post-Covid trends that insurers should tap into. Can you talk us through these trends, and how they will ‘set the stage’ for the industry post-Covid? 

A. For the past few months, millions of people across the globe have been forced to stay at home, overnight. Measures were taken to make sure people stayed safe and healthy. But, because of these measures, the scale of changes in consumer behaviour, in such a short time, was gigantic and unprecedented. Although the pandemic will eventually wane, a significant part of our new behaviour will stick. We believe that, specifically for the insurance industry, the current crisis amplifies four consumer trends, which serve as inspiration to reimagine the future of insurance beyond covid.  

Firstly, it has become clear that there is nothing of greater importance than your life and health. We also notice that in the behaviour of people. They started to exercise more and eat healthier. Health apps gained popularityFurthermore, the pressure experienced on the health system has sped up adoption of digital health solutions. 

The impact of Covid on the digital shift is evident in remote working, smart home technologies and changes in mobility. The second trend is therefore Connected LivingAfter years of incremental change in small steps, digital routines were embraced, forced though, within a few weeks. Resulting in a fundamental shift in how people will live and work. 

The third trend is about ‘Unprecedented uncertaintyWe’ve suddenly woken up to the reality that the world is more fragile than once believed. People find it hard trusting information. The sense of control seems to be far away. At the same time, economic forecasts are bleakConsumers will have a lower appetite for risks than before. Consequently, it is likely that they are more and more interested in protection. 

Challenging times see people craving for institutions that care and they expect them to support customers who are facing difficulties. The fourth trend is therefore about ‘Empathy in Everything and Showing you care’, especially when customers experience moments of truth. 

Q. There is no doubt that consumer behaviour has changed over the last few months. How would you advise insurers adapt their digital strategies to align with these changes in behaviour?

A. Leaders of insurers not only need to keep their business afloat on the short term, simultaneously, they also have to ensure the company remains relevant in the new market conditions once the dust has sort of settled. They need to fast forward digital transformation and reconsider not only processes, products, and services, but also distribution and operating models. Moreover, they should think of new business and revenue models, leverage the latest technologies and insurtech partnerships and seize new opportunities. 

In health, think about pro-active and preventive services beyond traditional insurance, data driven health and wellness platforms, and new ecosystems with health providers.

With remote working and more connectivity at home, think about the opportunities for new services and cyber security. 

The unprecedented uncertainty that people experience, regarding the economic downturnincreases the demand for insurance solutions and price propositions which are simple, transparent, and cost-efficient. 

Empathy is a pillar to differentiate yourself. The employees working at an insurance firm, as well as brokers and agents, are a valuable asset to do so. The challenge is to use advanced technologies to empower them. 

Q. Would you say that your personal experience of being a customer has changed over the last six months?

A. Interestingly, somethings I used to buy online, like groceries and home improvement tools, I had to stop buying online during the first months of the strict lockdown. Simply because the fulfilment processes of many supermarkets and DIY stores were not ready for the sudden increase in online volumes. This forced me to companies that already had a streamlined and aligned end-to-end process in place, such as Amazon. 

Although by now the supermarkets and DIY stores have stepped up their game, I still resort largely to my newly learned routines. And I am not the only one, given the number of Amazon trucks driving through our streets daily. 

 The biggest impact obviously comes from people who previously bought offline and are now used to the convenience of newly found online alternatives. For years ecommerce has been growing but this has now accelerated significantly. 

Q. Do you think it’s fair to say insurers have lost momentum with their digital strategies? If so, is this due to investment costs and the difficulty in accurately measuring their return? What advice can you give? 

A. That insurance needs to become more digital is nothing new. But the corona virus outbreak made it clear how slow the digital transformation of insurance has been so far; both internally and externally. The traditional distribution model turned out not to be competitive and sustainable. And on top of that, it was insufficiently agile to quickly respond to changing conditions and a less physical world. Incumbents experienced significant issues dealing with remote business. 

 The digital models on the other hand, proved to be resilient and successful in these difficult times. It seems they are better protected against the crisis and are more future proof. Advanced technologies allowing for remote transactions lead over traditional models. Never have these differences become so clear. 

 Being digital is paramount. More and more insurance executives are realising this. The current crisis is a wake-up call to many. They see the strategic importance and there is a clear sense of urgency. Simple digital products, online services and customer experiences, delivered at lower cost; becoming more connected and agile – they have become essential for continued growth or even survival. It is no longer an option to press the snooze button once again. 

Q. You’ve written a number of books which discuss a winning business model and practical guiding principles for future banks and insurers to close the gap between ‘digital transformation to restore the past,’ and ‘digital transformation to create a future,’ how would you say those guidelines have changed as the pandemic has unfolded?

A. With digital transformation to restore the past we referred to financial institutions’ focus on operational excellence and cost efficiency, digitalising processes and optimising operations. Cost reduction is absolutely necessary, but these efforts are about bringing the basics up to date. Restoring the past, not creating the future. 

Digital transformation to create a future’ is about deploying technology to not only reduce costs and solve basic frictions, but simultaneously lift customer engagement to a dramatically higher level. The current challenge for insurers is to avoid a kneejerk reaction and again focus on cutting costspostponing investments, and putting digital transformation programs on hold. 

Given the fundamental impact of the four trends we identified, it is more important than ever to look at which engagement strategies fit best with new customer behaviour, and how these new forms of customer engagement are enabled by new technologies. Now is the right time to seize the momentum, while so much change is already set in motion in such a short period. Fortunately, we see more and more insurers who agreeaccelerate their digital transformation and acknowledge the importance of involving insurtechs in this journey.

Q. A concern for brokers could be that the increased use of technology in the customer’s journey reduces their interaction and could hinder relationship building, how can this be managed?

A. In many markets, brokers will still have a fair market share in the next decade. Neutral objective advise will still be valued but needs to be delivered differently. 

Brokers play a pivotal role in relating to customers and showing empathy. The challenge is to use advanced technologies to empower them, e.g. by using AI to support human intelligence and making them even more effective and efficient. Creating the best of both worlds. 

Digital tools allow for personal relations with more relevant and meaningful customer contacts. Especially when they empower brokers to deliver new added value driven by dataUse actionable insights out of their data sphere to give fitting advice to customers and help them enhance their lives. 

Q. How can the collaboration of insurance executives and insurtech leaders lead to accelerated innovation?

A. The current crisis highlights which insurtech solutions are more relevant than ever, and which insurtechs to work with to accelerate digital transformation in specific areas.

Think of the limitations of traditional distribution models during the period when we had to stay at home. These have become most tangible at the front of the organisation, in virtually all stages and touch points of the customer journey. 

Many insurtechs are helping incumbents with exactly that, bridging the physical distance with customers; from sales and onboarding to claims and service. For example, by enabling remote advice using video, online verification of the customer’s identity, digital signatures, digital onboarding of customers, virtual assistants, but also remote claims assessment. 

Q. Can you name exciting disruptors you expect to see making waves over the coming year?

A. Several fast growing insurtech solutions are tapping right into the four post-Covid trends and are enabling insurers to accelerate their digital transformation. 

Virgin Pulse and Dacadoo provide insurers with a platform that combine coaching, data and all sorts of incentives to help people with healthier habits. CyberCube empowers brokers to understand cybersecurity profiles and estimate financial loss from cyber-attacks. ELEMENT is a full-stack insurtech supporting mobility ecosystems with contextual insurance solutions. Tractable’s AI supports insurers to assess damage and estimates repair costs in real time, to settle claims faster. TietoEVRY’s open partner ecosystem enables insurers to create new future proof services and business models. Wakam creates white label “embedded” insurance solutions, for all types of distribution partners: brokers, insurtech, e-retailers. 

These enabling solutions are already proving their impact and provide a key to the future of insurance beyond the current crisis. 

Reggy De Feniks is an Author and Speaker, Managing Partner of 9Senses and the Co-Founder of the Digital Insurance Agenda: Insurtech and Innovation in Insurance (DIA)