Years of complacency have created an insurance industry vulnerable to threats and ripe for disruption.
Unpredictability, lack of end-to-end oversight, and changing consumer expectations are challenging the insurance industry.
In an unpredictable world, insurance has never been more important; everyone wants to minimise risk and protect against financial loss. As the industry is set to boom, traditional players are risking their market share with outdated operational models, a lack of focus on digital transformation, and failure to meet growing consumer expectations.
The changing face of the insurance industry
Insurance companies have followed the same script for years and continued to deliver reliable profits. Why invest in new technologies when the old ways are still profitable?
The game is changing and a power shift is underway in the industry. Challenger brands are on the rise, customer experience (CX) expectations are higher, and events like the Royal Commission have highlighted the need for greater transparency and accountability.
Pressure is mounting on insurers to deliver new and improved products; the clock is ticking on the profitability of traditional insurance models. Three major threats to the industry have emerged which have the potential to shake up the industry and impact the future of insurance companies.
Threat 1: Global unpredictability
Unlike retail’s predictable peaks, like Black Friday and Christmas, the insurance industry lives in a constant state of flux. It’s impossible to accurately forecast future demand when you can’t predict pandemics, natural disasters, and category events. With climate change further fuelling global uncertainty, this is a threat that’s going to grow.
Global unpredictability presents a major threat to the profitability and viability of every insurer, but particularly those still clinging to outdated operational models and resisting digital transformation. To survive in an age of greater global unpredictability, a digital-first approach is required to reduce overheads and improve business intelligence.
Threat 2: Lack of oversight
Insurers are grappling with complex supply chains and a lack of oversight over the end-to-end claims process. Delivering on a policy when it’s time to claim is a process that involves an ecosystem of different players — multiple technologies need to talk to each other.
Insurers rely on builders and third-party administrators (TPAs) to manage contractor relationships. They lack visibility and end-to-end control over the contractors and systems, increasing the risk of the claims process being inefficient, costly, or completely going off the rails.
Compliance with regulatory changes by APRA and ASIC adds to the complexity. For insurance companies reliant on old school practices and outdated tech, regulatory changes — like tracking vulnerable customers — can present a massive issue when reworking monolithic systems.
Threat 3: Growing customer expectations
If a customer can track their pizza delivery order in real time, why can’t they track their insurance claim?
It’s a digital world and every industry is being forced to consider CX as part of its strategic planning. Insurers can’t afford to be left behind. The old approach to customer service based on timelines set by the insurer is less and less acceptable to customers in the digital age: it’s only a matter of time before insurance companies feel the heat of unmet expectations.
Consumers want online convenience — they don’t want to make a phone call or wait for a cheque in the mail. If they can get a better experience, a cheaper price, or personalised service elsewhere, they won’t hesitate to move. This applies right through the supply chain — customers judge brands on how they manage their contractors and people.
Embracing digital transformation in unpredictable times
Insurers can’t predict what will happen next, but they can still strengthen business processes and become more flexible, responsive and profitable by embracing digital transformation.
API first technologies are business-critical in the complex ecosystem of the insurance supply chain. Technology implemented at any level — insurer, broker, builder, TPA or trade — should be assessed on total value to the whole supply chain rather than any individual entity.
A transparent future
With the right technology, insurers can respond faster to insurable events, get supply chain visibility, and keep up with customer expectations. The three major threats to the insurance industry can be managed with an iterative approach to digital transformation — one project at a time insurers can transform from the inside out.