The following article is an opinion piece written by Jouk Pleiter, CEO and co-founder of Backbase.
“Software is eating the world”, as Marc Andreessen said in 2011. However, even if you had stepped into a time machine at that point and arrived in the present day you might be surprised to see the extent to which this has happened. Uber, a company that owns no vehicles, dominates the taxi business in many major cities around the world. Facebook, a company that creates no content, has become by far the biggest online destination for internet users. Airbnb provides thousands of people with short-term lets every day, yet owns no real estate.
Digital has revolutionised many different industries and the insurance sector makes no exception. New entrants and digitally leading competitors are looking to exploit this failing. With the intensive competition in this market it has never been more important to gain an edge on the opposition. And in order to be competitive insurance companies must start a full swing digital transformation program now to drastically lower their cost to income ratio. It’s imperative they shift their operations to a digital first model, and provide their customers a seamless digital experience, just like they get with Uber or Facebook.
However, this is easier said than done. An insurance company needs to examine all of its processes and figure out where automation makes more sense than using a human operator. After all, the costs for digital customer onboarding or online sales are significantly lower than in the physical world, where human intervention is required. The digital sales and self-service model has recently become more popular in the insurance industry and this allows for full end-to-end automation and straight through processing. For example, customers are now able to configure their own insurance policy, assisted by a smart guided selling engine, rather than being assisted by a human advisor. Subsequently the customer can actually buy the policy and apply all the required documents and signatures in an easy to use digital process, without having to sign any paper or visit any branch. And even better, behind the scenes, the whole process is fully automated and directly connected to the various back-end systems of the insurance provider.
It all sounds nice, but doing a full digital transformation is not easy. It requires a completely different way of thinking and working. This is true in many of industries - not just insurance - but I see too many examples of companies taking an “inside-out” approach in which they start with products and then thinking about how they push these products to the market. This approach is somewhat backwards. In my view, the best way forward is to apply the ‘outside-in’ approach. This starts with thinking about what it is that a customer wants rather than what products you want to push. Outside-in is all about starting with the customer, and creating a seamless customer journey.
Convenience and instant results are key for today’s digitally-minded customers. They want to be able to do their research into the type of policy they are going to buy online - though they may also want to have an instant message conversation in order to clarify some of the finer details. They want to be able to make their application online, and they want an answer as quickly as possible. These are all areas where digital can help - a comprehensive, interactive website with a configuration tool for policies, chatbots and data-driven risk calculators at the back-end will meet these needs. Facilities to scan ID documents through a smartphone app are another way insurance companies can provide customers with a frictionless experience. And while all sales processes need to go digital, as far as possible, so do the self-service processes customers undergo for making a claim.
One other significant obstacle that insurance companies face is that their operating and collaboration model is old school - not ready for the digital world. There are often separate siloes within a business that have grown independently from each other - sales, marketing, IT and so on. Compared to Fintech start-ups that work with small multidisciplinary teams, these old school collaboration models simply are too slow and have way too much overhead. Time is of the essence, though, and insurance companies need to think more like lean technology start-ups in order to put this platform in place quickly. There is no time for separating out the market analysis, product design, development and testing processes - you need to create a small team that can do all of this at once, testing as they go along. After all, this is the agile approach that many new players in the insurance market are taking, and in order to keep pace with them it is necessary to be able to move fast.
The views expressed in the preceding article are those of Jouk Pleiter and do not necessarily reflect those of Insurance Business. You can find out more about Jouk at the Backbase website.
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