While the overwhelming majority of insurance industry executives recognize that major market changes are afoot, only about one in four are engaging in true digital transformation of their business. But those “Digital Transformers” are projecting twice the growth (7.8 percent) of their less digitally aggressive competition (3.9 percent).
Differences between Digital Transformers and Digital Followers are showing up in a variety of ways. For example, only 25 percent of insurers have a single view of the customer and see customer-centricity as critical strategic imperative. And a mere 22 percent see cloud technologies as important to their business.
On the other hand, 84 percent acknowledge that digitalization is changing customer expectations. Eight out of ten also believe that new technologies will radically change the industry’s traditional practices.
These are among the findings in a new research report from Accenture, entitled “Seizing the Opportunities of Digital Transformation.” The report, which is based on a survey of C-level executives at 141 P&C and life insurers in 21 countries between July and September 2014, revealed several other notable industry trends:
- Almost half (43 percent) of insurance industry executives say their companies have already or are planning to acquire innovative startups in order to enhance their digital capabilities. Most (59 percent) expect their competitors to do likewise.
- Key acquisition targets include telematics companies (47 percent), price comparison websites (43 percent) and analytic technology solution providers (38 percent).
- Even more insurers (72 percent) see distribution partnerships as a key to competitiveness in an increasingly digital marketplace—with primary targets for such partnerships including banks (69 percent), Internet players such as Google and Facebook (44 percent) and online aggregators (44 percent).
One reason that some insurers are less aggressive digitally than others is that they see the coming industry transformation as more of a menace than an opportunity. Only 29 percent of the survey’s respondents said they expect grow their customer base—and, by extension, their premium revenue—by developing new digital channels. About 4 out of 10 also expect to see margins decrease as digital markets put downward pressures in pricing.
Despite such concerns, Accenture is strongly encouraging insurers to take an aggressive approach to digital innovation—asserting that the rewards for doing so may be even more substantial than even Digital Transformers themselves believe. The report’s authors also differentiate between what they term “digitization” (the use of new technologies to existing business processes) and “digitalization” (the embrace of innovative technology-enabled strategies, products, processes and experiences to generate entirely new revenue streams.
“We believe that the industry is entering an unprecedented period of change, which will lead to totally new products, services and business models,” said John Cusano, senior managing director of Accenture’s global insurance practice. “Our experience shows that insurers that have a clear digital business strategy in place, as opposed to siloed initiatives, can achieve even higher growth.”
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