Justin Whitehouse, Director of Interim Management at Oliver James Associates, discusses why the insurance industry needs to step up its game in the digital era.
Digital transformation is progressing in most industries. So why is the insurance industry lagging behind? Are insurers making decisions on digital capabilities with an ‘operating cost’ mind-set when other industries are treating it as an investment? Or has regulation within insurance hindered digital innovation altogether?
It’s no surprise that the digital age brings a multitude of opportunities alongside strenuous challenges. With the methods of operation changing within insurance, the established insurance firms are now realising that they are not necessarily safe. Failing to adapt to customer needs in a digital age means they risk falling behind whilst competitors with better digital strategies rise to the top.
Why isn’t the insurance industry learning from the banking sector? We’re seeing multiple digital entrants into the retail banking sector that are offering consumers services outside of the traditional offerings. Banks such as Tandem are providing consolidator style services (think ‘moneysupermarket.com’ and ‘comparethemarket.com’) with the core aim of creating customer loyalty and not just short term profit.
With the consumer in mind, why don’t other regulated industries, predominantly insurance, follow in banking’s footsteps? Let’s look at car insurance renewals for example; why are renewal quotes always higher than equivalent offerings from competitors? Or even worse, higher than a new customer to the existing company? And why do utility companies always offer to reduce the fees when a customer leaves?
With a greater focus on NPS (net promotor scores) wouldn’t insurers be one step ahead of their competition if they could provide a competitive market overview on a regular basis. When was the last time you actually recommended your insurance or utility company?
In a customer focused industry, it’s a surprise at how far behind the insurance industry is. A recent Accenture survey found that 53% of customers would not recommend an insurer to others if the company provided no means of digital interaction. All industries face the challenge of adapting to change but insurance in particular is an industry that lends itself to digitisation. A global CEO survey carried out by PwC found that 61% of insurance leaders foresee more digital disruption than in any other commercial sector. Alongside this, an international report published recently by KPMG discovered that 74% of the 280 insurance execs surveyed felt they lacked the internal core skills needed to drive digital innovation. With the increased competition from digitally-savvy newcomers, do insurance firms need to review their hires? Should they look to recruitment partners to source outside of the traditional skill sets to meet demand in a digital world?
Digital disruption is also coming from companies operating outside the insurance industry. The Accenture global survey mentioned earlier, discovered that 23% of people would consider buying insurance from online services such as Amazon or Google. Surely a terrifying statistic for the traditional insurers? It’s evident that Insurance companies recognise the great threat posed by digital disruption. With the banking sector having already cottoned on, a sound digital strategy is a must for any insurance company that hopes to profit in this digital era rather than sink.
If you’re interested in finding out more about Interim Executive Management opportunities please contact Justin Whitehouse Justin.Whitehouse@ojassociates.com / 0207 398 4466
Alternatively, if you're interested in opportunities within Digital, contact Tom Pain, Manager, Digital, Tom.Pain@ojassociates.com/ 0203 675 6821
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