Navigation through uncertainty: How Insurance should be ready for the challenges ahead in a digital-first world?

October 29, 2021 3:23 PM

As businesses progress towards ‘growth and recovery’, the fear of uncertainty will continue to lurk in the market and, ongoing speculation on future COVID infection waves will cast a cloud over customers’ judgement of their own risks and protection needs

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By Arpita Mitra

The core of insurance is to beat the odds of uncertainty and stand resilient with the ones whom they have pledged to protect in the face of unprecedented crisis. However, COVID has turned the tables. It was not just the policyholders alone; the scale of the crisis and the degree of impact meant huge implications for the industry as well– starting from re-computing minimum capital limits to re-defining the rules of customer engagement.

Amid the crisis, the insurance industry stayed at the helm by keeping ‘empathy’ and ‘accessibility’ at the core of any decision-making process. Business leaders focused on shifting operations to remote, incorporating technology to build operational efficiency, and enhancing digital capabilities to sustain business transactions. The industry continued the transformation from the inside out – to replace their old means of dialogues with ‘new’ versions of interaction plans, sales blueprints, operational strategies and more.

As businesses progress towards ‘growth and recovery’, the fear of uncertainty will continue to lurk in the market and, ongoing speculation on future COVID infection waves will cast a cloud over customers’ judgement of their own risks and protection needs. To tackle this fear and speculation , a lot will depend on the insurer’s capabilities to forecast the evolving needs of its target customer groups and the timeliness of its response to market demands.

Although majority insurers believe that they are far more confident in 2021 and are on the recovery path, close to 30% said they are still tackling issues arising from COVID induced circumstances, such as `remote work transitions’ and ‘unemployment crises’.On the flip side ‘use of autonomous technologies (e.g., AI, robotics, etc.)’, ‘competition from digital-native enterprises’ and ‘business model transformation’ are the top non-COVID related priorities which are pursued by the insurers.

However, according to IDC Future Enterprise Resiliency and Spending Survey, 2021 majority of the respondents (~70%) continue to face a shortage of skilled resources who could manage the legacy systems – making reconciliation of systems a herculean task to proceed for the next cycle of transformation.

Another key thing to note is during the pandemic investments were more driven by the immediate, short-term and tactical needs of the businesses which are less likely to sustain the challenges posed by the digital-native enterprises. The fragility of the staggering transformation initiatives will not allow desired returns on investments, and neither will be able to scale in line with the growing customer expectations in the long term.

The organization culture mindset must change and be driven by the desire to innovate at every stage of the value chain – bringing ‘intelligence’ and ‘automation’ to the forefront of any interaction. Insurers need more flexibility in the operating design, speed in execution and agility to thrive to be afuture-ready enterprise.

In summary, five capabilities that we think will make the future-ready insurers:

  • Design an end-to-end marketing strategy: Identifying all the big and small opportunities to communicate with customers and designing the experience to “engage” goes a long way to improve brand recall, contract value per customer, and word-of-mouth-based recommendations. Multiple research studies have suggested that curated ‘user’ experiences tempt customers to share more information in return for personalized services.
  • Shift from mass-market to user-focused product strategy: By re-designing new products which cater to niche customers’ needs or mass-market needs, that are more contextual to the local market environment.
  • Integrate Dynamic and real-time pricing: Complex pricing strategies are often the main deterrent to the retention of customers, who fail to realize the value for the premiums paid, particularly at the time of notifying claims. Price differentiation is fundamental to business, but at the same time, given the accessibility to structured and unstructured data from the business environment, underwriting teams can leverage analytics and predictive modelling to make more personalized offers to customers – that renders more transparency to the entire process.
  • Empower distribution staff for the future: Equally critical for insurers to enable the traditional intermediary channels with tools to drive three important outcomes: 24/7 continuity in customer communication, self-service option for customers, and faster service delivery time. During the pandemic, there was a significant impact on new businesses generated through agent-client interactions giving way to higher growth in digital sales. However, branch-based and agent-based interactions are expected to resume but will be subjected to hybrid-work policies adopted by individual insurers.
  • Embed ‘What is the ‘Customer- Opportunity’’ for every decision: A massive shift from the product-focused to customer-focused strategy makes it paramount for insurers to create new engagement- opportunities for customers which are intuitive, contextual and personalized.

*Source: IDC Research, Wave Survey 2020

(Arpita Mitra is Senior Research Manager at IDC Financial Insights Asia/Pacific. Views expressed are personal.)

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