When it comes to customer service, insurers are behind the curve.

That’s the striking conclusion of a new study from the Boston Consulting Group (BCG) and Morgan Stanley, which compared insurers’ customer interactions with those of other service providers. The study attributed this primarily to insurers failure to take advantage of new technologies such as online portals.

The study, “Insurance and Technology: Evolution and Revolution in a Digital World,” revealed that more than 50 percent of consumers interact with their insurer either once a year or not at all. And when customers do engage with insurers, the experience leaves them largely unsatisfied: According to the study, insurers are ranked 14th out of 16 categories of service providers for online satisfaction, lagging far behind other sectors such as banks and government services.

BCG and Morgan Stanley interviewed 56 senior executives of insurers and technology providers globally for the study, as well as insurance consumers in 12 countries, including the U.S. and the U.K.

Dissatisfaction with insurance sites reaches its peak at the claims management stage, according to the study. Only 38% of consumers report satisfaction, down from a 69 percent satisfaction rating during the research process.

 “While there are some positive areas, consumers’ overall digital experience with insurers lags that of other industries, particularly when it comes to ‘moments of truth’ such as paying claims,” said Jean-Christophe Gard, a partner at BCG. The report also found that many consumers regard current insurance products as expensive and inflexible.

The solution for the industry, according to the study: Use new techniques such as tighter connectivity between devices, systems and services, as well as better handling of big data, to offer innovative products to younger and more affluent customers. This type of technology-driven program has the potential to fundamentally change the business model of insurers around the world, the report stated. Those who are slow to embrace this disruptive technological change run the risk of being left behind.

Among the benefits of big data for insurers: the ability to price risk more effectively and in a greater variety of ways. This will lead to a significant reduction in some risk pools, the report stated. It also held up the travel industry as an example of a successful migration of customer interaction to the online arena, with corresponding business growth and increased visibility.

 “While some aspects of technological change — such as improved operating efficiency, the need to engage creatively with customers digitally and increased disintermediation—are common to many industries, we see several insurance-specific challenges,” said Jon Hocking, head of the European insurance equity research team at Morgan Stanley. “Insurance is fundamentally about the pricing and selection of risk. We believe that the Internet of Things and big data will change the types of data that insurers use to assess risk, the way in which it is analyzed, the way claims are notified and managed, and ultimately the size and structure of the actual risk pools.”

P&C is likely to see the biggest long-term impact from technology disruptions, according to the report. “We expect that the P&C industry will move from actuarial risk assessment using statistical techniques to structural risk modeling based on real-time observations,” said Michael Niddam, a partner at BCG. “Similar changes are likely to be seen over time in health insurance and life protection, while in the savings business online distribution will create greater price transparency and erode margins.”

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