Mark Boulton, Insurance Sector Lead in UK & Ireland at Fujitsu
Insurance companies face many challenges – from market instability to huge catastrophes which they need to protect businesses from, such as earthquakes and tsunamis. But one of the biggest challenges is the adoption of digital technology, which has completely changed consumer behaviour and means insurance companies need to adapt.
We only need to take a look at the headlines to see the impact that digital has on financial services. Established brands are now striving to ensure services are as seamless as possible, while customers and businesses are demanding a more personalised experience across a variety of different channels.
To examine this in more detail, Fujitsu recently conducted a European wide piece of research, surveying 7,000 consumers, looking at how banking and insurance are evolving and what this means for customer loyalty. The research found that while digital capabilities are hugely important in banking, insurance consumers are at an earlier stage in their development and change will need to be managed more gradually.
What was clear from the research was how insurers can embrace the digital age. Three key themes emerged:
Customer experience is crucial to retain customer loyalty
59% of consumers cited customer experience as a major factor when interacting with financial services. As such, it’s time for insurers to take heed of the shake-up digital disruptors have brought to the industry as almost half (41%) of consumers now rely on comparison websites when considering insurers.
Firms could find themselves suddenly outmanoeuvred if they fail to embrace digital innovation and offer consumers new possibilities: one-in-ten (12%) consumers now regard up-to-date technology as a major factor in staying loyal to their current insurer. As such, transformation of the ‘back office’ is the first step that will make a radical difference to consumers in the long term. There is also a potential to automate this back office to enable lower cost of service and the ability to be able to provide speedier resolution models.
In addition, there is an increasing opportunity for insurers to have better data on their customers and to use this to provide better services, improve retention and also to provide more timely and relevant offers. Insurers still do not upsell and cross sell effectively and with more data being held by other parties, the customer proximity is continually being eroded.
With the quick pace of change in banking and across other sectors creeping into insurance, it’s only a matter of time before we expect the number of consumers looking at up-to-date technology to stay with an insurer to increase.
The need to be secure in this digital age
If consumers look to switch insurer, security and up-to-date technology are often the motivating factor. Cyber-attacks and data breaches are increasingly taking over media headlines, and as a result, security is top of mind for consumers. In fact two-thirds of consumers (59%) would switch if their provider suffered a security breach, while more than a third (37%) would leave if not offered up-to-date technology for interactions.
As well as this, fraud costs across the industry are rising. There is now a variety of different types affecting organisations, from application fraud, to claims fraud to greater financial fraud.
Because of this, it is paramount that the industry does not overlook, or get complacent about security. It’s also important that it doesn’t place it in the “too big to fix” category, and instead take a proactive approach. As part of this, financial services need to be able to spot, react and defend against a breach quickly, by having a threat monitoring/detection system in place. This provides the necessary context to deal with today’s advanced cyber threats. Insurers could also do more to help educate their customers to be more vigilant of the threats to financial services, such as opening up unexpected emails.
The benefit of an end-to-end digital service also has the opportunity to reduce fraud, as it allows organisations to collect or have access to more information on the client from the point of the original application.
Collaborate to innovate
Collaboration is essential. There is a huge opportunity to change business models, opening up new revenue streams and increasing value to consumers. Through working collaboratively, the dominant players in the financial services sector can take the lead in the race for lucrative innovation and pave the way to our global digital future: emerging stronger, faster, and more successful.
With digital continuing to pave the way in financial services, insurers can no longer afford to be complacent when it comes to digital transformation. Consumers, competitors and technology will only continue to move forward so it’s up to the industry to keep up. Only time will tell what the future landscape will look like.
(This article was published in Finance Digest Magazine, April 2017)
“Original publication in Finance Digest Issue 1 https://www.financedigest.com/