Insurers are focused on changing their processes in order to meet customer demands for a more digital experience, but that trend is having some unintended consequences, according to a new survey.
The efficiency and transparency realized by increased digitalization in insurance is driving prices down, consultancy Simon-Kucher & Partners discovered in its 2017 Global Pricing and Sales Study. The company interviewed 46 insurers around the world and found that 46% -- nearly half -- identified price pressure as the biggest barrier to revenue growth. Most planned price increases are slashed or not implemented at all -- a third of insurers said that they implemented 20% or fewer planned increases.
What's good news for customers, though, isn't good news for insurers. Implementing digital processes at the expense of growth impacts the long-term viability of a company. Specifically, digitalization is correlated with low-cost competition and increased price transparency, the two largest contributors to price pressure.
Insurers can't afford to put the brakes on digitalization though. So, Simon-Kucher suggests that carriers invest in "value selling" -- that is, training the sales staff and designing the digital customer acquisition experience to focus more on the value proposition of the product, and using data to identify the highest-value customers. That is, insurers need to think of digital in terms of how it delivers growth, not just how it cuts costs.
"Like many other industries, digital transformation is top of mind for the insurance industry. However, we find that most of the digitalization investments to-date are focusing primarily on process efficiency," says Wei Ke, head of the North American financial-services practice for Simon-Kucher & Partners. "The natural next step is to consider monetization opportunities through the digital channel, both at the point of sale and post-sale engagement."
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