Global insurers have failed to take action and embrace the digital world, according to “Insurance in a digital world: The time is now,” a survey from Ernst & Young. According to the survey, almost 70 percent of respondents spent less than 10 percent of their business and IT development budgets on digital initiatives.

“They would like to become digitally inclined, but they haven’t been able to align the development dollars yet,” said Kaenan Hertz, executive director of the financial services office for Ernst & Young. “Less than 10 percent of the IT budget is going to digital initiatives. That leads to a big disconnect between aspiration and their ability to deliver on that aspiration.”

Inhibitors of digital growth vary by region, E&Y said. In the Americas, insurers struggle with the constraints of legacy technology; Europe struggles with the slow pace of delivery and Asia-Pacific is more concerned about regulatory restrictions, E&Y said. Further, there is a disconnect between the commitment of resources and ambition.

“Insurance companies globally have short-term ambitions when it comes to digital,” E&Y said, as 57 percent of respondents said they intend to have a regularly updated digital business case and 78 percent intend to have an organizational structure to support digital strategies within the next three years.

Insurers acknowledge low levels of digital maturity and the need to act; almost 80 percent of respondents don’t consider themselves to be digital leaders, E&Y said. More than two-thirds of insurers said they have delivered quick, easy wins, but that has not been accompanied by a long-term strategy to realize ambitious digital objectives.

Customer experience

“Most of the insurers are looking at the digital channel from a customer experience and then a retention perspective,” Hertz said. “It’s less viewed as an acquisition tool and much more about how to service the customer online. That’s interesting. When you think of nonfinancial services industries, acquisition is the primary part.”

However, according to the report, 89 percent of insurers don’t leverage past interactions when recommending products or services to online customers; 1 percent offer online rewards, discounts, apps or live website assistance, although 27 percent said they expect to offer those functions in the future.

"Insurers are failing to communicate at critical times and are missing opportunities to engage with customers in the life cycle of a policy through the use of digital retention triggers and predictive modeling," said Graham Handy, E&Y's global insurance customer leader.

More Hurdles

The biggest barriers are legacy systems and the lack of strategy, E&Y said; 47 percent of respondents said they lack a cohesive digital strategy business case, and 57 percent said they lack appropriate operating models to deliver digital capabilities. More than a third said senior management support is "not always backed by actions, budget and resources," despite 40 percent having support from senior management and a digital sponsor within the C-suite.

Legacy technology, culture and the slow pace of delivery hinder the process, E&Y said. In the Americas, 96 percent said legacy technologies are a major impediment; globally 80 percent said the same. In Europe 93 percent said slow delivery, vs. 64 percent globally.

Channel strength or resistance also is a top-three inhibitor to implementing digital strategies, E&Y said. Almost half of European insurers said that was the case for them, and 34 percent of Asia-Pacific insurers said that was an issue.

The most in-demand skill set is analytics capabilities, including segmentation, customer data and predictive modeling, as per 75 percent of respondents, followed by technology and marketing capabilities. "Without appropriate analytics skills and tools in place, the digital business case may never be realized," Handy said.

Mobile and social media

Insurers focus on mobile products and services is limited, E&Y said,despite the fact that mobile and tablet use has been growing exponentially. Insurers also should be taking social media more seriously by recognizing its value as a comparatively inexpensive marketing tool and method to engage and influence skeptical, digital-savvy younger consumers.

E&Y said 43 percent of insurers now offer mobile quotes; 72 percent offer them online. “Even the non-life market, with simpler, shorter-term products that can be more easily enabled digitally, significantly under-exploits mobile,” E&Y said.

Life vs. nonlife

E&Y said the life sector is currently less advanced, but spending more on its digital strategy than the nonlife sector.

“Seventy-nine percent of non-life companies spend less than 10 percent, with a further 11 percent spending in the 10 percent to 20 percent range,” E&Y said. “In contrast, 68 percent of life insurers spend less than 10 percent, with an additional 28 percent spending 10 percent to 20 percent.”

However, according to the report, life insurers seem less concerned (46 percent) than nonlife companies (60 percent) that "customers will ultimately leave us" or that "partners may shift their business elsewhere" (48 percent vs. 58 percent, respectively.)

"Whether insurers can make the ambitious changes they envisage within the next three years remains to be seen,” Handy said. “Attaining their goals will require significant – and rapid – improvement to close the current gap. However, customers will demand considerable changes in how their insurance is delivered, and the winners will be those insurers who execute well against their digital ambitions in the coming years."

The survey was conducted in July 2013, with participants from more than 100 insurance companies.

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