The global insurance industry has been adjudged to be facing its very own “Kodak moment” as it fails to respond to digital transformation or changing customer behaviours, according to Darrel Orsmond, financial services industry head at SAP Africa.
In an article, “The (very near) future of insurance: the digital transformation imperative”, Orsmond noted that the industry is currently running the risk of their own Kodak Moment, saying that Kodak, one of the world’s most dominant market leaders, was virtually wiped out because it simply could not adapt to a changing consumer and business environment.
“The insurance industry is facing a set of challenges that will upend insurers’ business models. In fact, 75 percent of insurers believe that industry boundaries will dramatically blur due to Internet of Things (IoT) and other platforms. While most insurers are still focused on selling insurance coverage and settling claims, customer expectations are changing quickly and dramatically,” he said.
“Today’s customer expects tailor-made coverage for their individual life situations, and want insurers to offer on-the-spot, personalised products and solutions,” he pointed out, adding that new fintech players are answering this call much quicker than the traditional insurers: legacy insurers can only stay in the game if they are willing to adapt.
“The mistake that a lot of companies are making is to think of sensors and IoT devices as the beginning and end of the digital transformation. However, they are simply supporting technologies for the bigger transformation at hand,” he noted.
According to him, real transformation is about how insurers use IoT and their vast sources of internal and external data to change the customers’ experience and adopt current technology to reimagine entire business models.
He noted that insurance providers across the world are facing increasing pressure of costs, the ability to grow revenues and their contact with customers and that they are generally not responding fast enough to digital transformation or changing customer behaviours, and run the risk of their own Kodak Moment.
“One of the main mistakes insurers currently make is to think to implement a shiny new digital front end or mobile app will solve the issue of their disparate legacy systems and enable them to quickly adapt to customer expectations.
“It won’t, because it doesn’t solve the core problems of increasing contact with customers, anticipating events, which are insurable, and delivering timeous offers which make use of deep insights and customer knowledge,” he noted.
For him, solutions to the challenges of the industry are not a matter of efficiency, cost reduction, or customer satisfaction only: this is a matter of survival, adding that digital transformation requires end-to-end processes from the front end all the way through the business to the back office, enabling a truly data-driven capability and a digital experience for customers, brokers, affiliate partners, and internal users.
“Digital transformation must come from the core with a modern, dedicated digital platform supported by CEO buy-in – or you’ll simply spend a lot of money and time implementing fresh legacy systems and creating, even more, complexity,” he said.
He added: “Technology is accelerating the pace of change in society and business. When everything – from lifestyles to customer expectations to business models – is changing, the time for stop-gap measures is over. Forget front end and tactical workarounds, and start embarking on real transformation, harnessing meaningful, digital insights, better margins, and greater value.”
He said new technologies like sensors and IoT-connected devices are becoming more widespread, and customers expect their insurers to use and innovate with these technologies to improve their experience.
“Insurers can’t just connect sensors and instantly provide usage-based insurance. In addition to providing ever-important premium adjustments, insurers need to leverage technology and innovate to provide additional benefits and customer services pre-emptively and then monetise such services.
“This can be more readily achieved by using sensor and other data. The more sensor data created, the more opportunities insurers will have to provide additional services and benefits for the customer. Naturally, the services will vary based on the property that’s insured. For a connected car, services might include parking or roadside assistance,” he advised.
He suggested that for a connected home, the service could be automated responses to sensor-detected issues. For example, a water leak would automatically dispatch a plumber to the house. For a connected human, wearables could detect potential health issues and alert an appropriate medical provider before it becomes life threatening.
“For insurers, the challenge is clear: go all-in on digital transformation, leverage sensor technology, data, and innovate new products and services that improve the customer experience. The alternative: suffer your own Kodak moment, and be relegated to the history books,” he surmised.