Digital transformation well under way in the insurance industry
Published: 10 April 2020
The insurance industry is working to digitalise its entire value chain to help reduce costs, improve the customer experience and allow it to compete with innovative new insurtech.
Insurance digitalisation for better customer relations
According to a study by EY, more than 80% of consumers expect to interact with their insurance provider digitally, via the internet, mobile apps, chatbots, video or telephone. It is therefore crucial that insurers provide an optimal multi-channel customer experience to boost customer acquisition at the underwriting stage. At this critical step in the customer journey, insurers must offer an optimised conversion funnel that collects the information needed to draw up a suitable contract. To ensure the process is 100% paper-free, documents can be electronically signed online or by a call centre agent.
This approach is maintained throughout the customer lifecycle to foster loyalty and reduce attrition. When filing a claim, for example, the use of simple, automated processes to gather information and make payouts will help ensure customer satisfaction.
Payments – the foundations of a successful insurer
Offering the right payment method plays a major role in customer acquisition and ensuring a constant revenue stream. Insurers must be able to tailor the payment method to potential different uses depending on the scenario and the options on offer.
Payment terms often vary based on the type of insurance (home, car, public liability, etc.). Insurers can offer upfront or monthly payment options, and must also be able to offer payment methods suited to one-off transactions (for breakdown services, for example).
As is also the case in a number of other industries, the insurance sector is witnessing the emergence of the “pay as you go” business model. Today’s customers want flexible offers tailored to their actual needs. With car insurance, for example, we are seeing some insurers adapt their monthly premiums based on distances travelled as measured by a GPS tracker. As this so-called pay-as-you-drive model becomes more common, it will require an equally flexible payment solution to adjust the amounts payable.
And, in order to offer more payment options, insurers will also need to remain tuned in to the latest market innovations. PSD2 (the EU’s revised Payment Services Directive), which came into effect on 14 September 2019, introduced a new payment option: PIS (Payment Initiation Service). This new method allows insurers to initiate a payment from the customer’s bank account, provided the customer has given their consent. The advantage of PIS is that it reduces the risk of non-payment, because the payment is transferred electronically and cannot be cancelled.
Therefore, insurers should think carefully about the potential payment options in different scenarios to improve conversion rates and secure future revenue.
Data and the future of insurance
The insurance industry has always relied on data analysis to establish accident statistics, draw up risk profiles, reduce the risk of fraudulent claims and optimise payouts. As more and more of our lives migrate online, insurers will find new sources of data at their disposal.
Most importantly, they will be able to collect information on their customers’ digital behaviour through social media, preferences and shopping habits. The growing popularity of the Internet of Things – with smart homes and smart cars for example – is another rich source of data for insurers to tap into.
The PSD2 directive mentioned earlier also introduced the AIS (Account Information Service), which can be a veritable gold mine for insurers. Using API connections, they will be able to access the bank account information of customers who have given their consent. This offers up a wide range of potential added-value applications, such as during KYC (Know Your Customer) procedures or credit checks. For example, an insurer will be able to see that a customer has booked flights with a foreign airline and can then offer personalised travel insurance.
By combining and analysing all of these data sources, insurers will be able to get to know their customers better and thus send personalised offers, improve the targeting of ad campaigns, and fine-tune risk profiles based on each customer’s individual habits.