Why hasn’t digitalization led to more revenue growth?
During the past five years, the insurance industry has invested heavily in digitalization—more in fact than almost all other industries. Yet within the industry there are still widely different views of what it means to “digitalize,” and, according to the Global Pricing & Sales Study 2017, only 26 percent of insurers say their digitalization initiatives have led to revenue growth.
What’s going on?
When it comes to digital operations, there is still a great deal of uncertainty among carriers and others as to which measures are necessary to attract customers and generate growth. For some, merely offering an online option is deemed sufficient. Others believe much more elaborate strategies that embrace customer portals, apps and new distribution channels, such as mobile, are called for.
Inconsistent views go hand-in-hand with inconsistent strategies. Although many insurers have developed digital roadmaps, different initiatives still aren’t aligned and digital channels have not been integrated. These disconnects waste an enormous amount of resources and limit the value derived from various projects. Often times, new digital processes are not customer-oriented and have not been monetized.
As a result, much of the time and money insurers are putting into digitizing their processes fails to bring in new revenue that’s commensurate with the investment.
In order to successfully master digitalization, an insurer must transform its business model. The company’s orientation has to shift from products to customers, and it needs to focus on solutions rather than divisions. For many insurance companies, this presents a massive challenge. Organizational structures, in particular, are still too rigid to support these changes and need to be more interwoven.
This especially applies to insurance distributions channels. The real potential of online channels lies in how they can be used to identify and adapt the sales process to individual customers’ preferences. By changing the way in which information, products and add-on offers are presented to suit those preferences, these channels can systematically facilitate and accelerate high-value sales.
To provide a fuller and more consistent customer experience, sales, marketing and customer support need to be intertwined online, and this involves more than simply presenting print brochures in a digital format. Instead, insurers should focus on those levers that really can increase conversion rates and encourage buying behaviors. Pictures, videos, short explanations and various interactive elements can all be used to make selecting an insurance product a much more user-friendly experience. Likewise, similar tools can be used to upsell and cross-sell a variety of products.
By applying the techniques of behavioral economics (the scientific study of customer choice and buying behavior), digitalization allows insurers to provide a curated online shopping experience that personalizes the insurance buying process. And it doesn’t have to be overly complicated. Insurers don’t have to compete with the complexity of Netflix algorithms to create something that makes decision-making easier for their customers.
To take full advantage of digitalization, insurers need to develop a holistic digital strategy and provide a consistent shopping experience on all their distribution channels. Websites should be easy to navigate and present products and promotions in a clean, self-explanatory manner. Some of the more successful online retailers provide useful models. Also, sales tools should be adapted to digital media in user-friendly formats. In other words, transferring a 20-year-old premium calculator to a tablet will not do the trick.
Insurers who embrace digitalization with new business models, organizational structures and sales processes will be able to seize on numerous opportunities to grow their revenue. Those who try and restrict their digital efforts to isolated corners of their business will find those efforts wasted, having little to no impact on the topline.