Insurers have accelerated their digitalization tremendously over the past two years. They now need to build on this to strengthen their offerings and relationships with existing customers while attracting new ones. Peter Helfenstein, Senior Business Development Manager Banking, Financial Services, Insurance at Endava, outlines the top 5 trends to achieve these goals based on Endava's report on "Top Trends That Will Underpin Digital Acceleration in Insurance".
1. Personalization Is Essential
Customers' expectations of personalized experiences have risen sharply in recent years – and this also applies to insurance. However, personalization does not just mean individual risk assessment. It also means that aspects such as the rhythm of installment payments or the coverage of claims by the insurance company are tailored to the insured person's needs. Insurers must rely even more heavily on new technologies and data to make tailored offers to policyholders, from personalization engines and predictive analytics to telematics and sensor data.
2. Make the Most of Data
Speaking of data: insurers need to understand their data better – what is collected where, what is valuable, and how can its full potential be realized? However, due to the gradual shift from paper to digital documents and independently operating departments, many insurers' data assets are highly fragmented. For example, a specialized data warehouse can only be populated by data related to a specific task. As a result, they need to rebuild their data model across the enterprise and implement the appropriate data platforms and data processing tools.
3. Develop Where Required
Insurers still primarily rely on third-party software. There's nothing wrong with that, but these solutions cover only 80 percent of all use cases and are available to all competitors. Therefore, differentiation is hardly possible. That's why more and more insurers are opting to (further) develop individual components of their applications themselves, for example, to offer customers new functions and differentiate themselves from the competition. Small-scale digitalization can also gradually lead to significant improvements and modernization of the IT infrastructure. A long-term, strategic partnership with a technology company that knows the industry, the insurer, the complex software environment, and brings the corresponding expertise and development capacity is also particularly suitable for these tasks.
4. Transparency Builds Trust
Many people have tended to regard taking out insurance as a necessary evil, with the insurer referring to the fine print in the event of a claim to pay out as little as possible. Anyone who wants to expand their business – even with existing customers – should set out to improve this negative outlook and position themselves as a reliable partner: a clear and transparently communicated policy builds trust, as customers know what services they can expect. However, these kinds of insurance policy are often easier said than done because they are inherently complex. Therefore, insurers should examine how they can simplify their products and how this could be reflected in their policies and advice.
Making Claims Easier
In the event of damage, the next challenge often awaits policyholders: making their claims. This process costs time and can be quite nerve-wracking – in a situation that can be stressful enough already, depending on the damage. Insurance companies should therefore streamline the process as much as possible, enabling online submissions with easy-to-understand forms. They can also introduce automatic payouts if the circumstance meets certain conditions. For instance, in the case of flood insurance, this can happen when flooding reaches a particular water level.
The insurance landscape is repositioning itself; it's no longer just about offering risk transfers. Instead, it's about providing a personalized customer experience and, through the proper use of data and technology, becoming an insurer that is not only able to attract more customers and increase revenue. The trend shows that insurance is becoming something that customers need and, in the best case, even want to take out.
Endava's report, released on March 9, 2022, presents nine trends that will shape the insurance industry in the coming years.