Insurers’ traditional business strategies are under fire as emerging technologies cause economic, business and societal disruption. IBM found that the industry’s top insurers differentiate themselves across four dimensions: customers, interactions, services and structures.
The company, which recently announced plans that benefit its enterprise customers, interviewed executives from 80 insurers that represent the 73 largest insurance markets across the globe. Insurers defined as leaders are frontrunners in both profit and growth, with ROI in the top two quartiles over a 3-year period and CAGR at least five points higher than market CAGR over the same three years.
Results show that customer centricity and customer interactions are two areas of concern among non-leading insurers. Although many businesses claim that customer centricity is a top priority, only leaders have developed truly effective strategies in that space.
“Leaders are actually focusing on [customer centricity] and others just say they’re focusing on it,” says Christian Bieck, report author and global insurance leader for the IBM Institute for Business Value. “They say they’re focusing on the customer – and they might want to – but they don’t really know how to go about that.”
The majority of industry leaders (88%) ranked changes in consumer behavior as important or very important, compared with just 35% of non-leaders. Almost three-quarters of leaders use social media to communicate with clients and 61% believe in a strong focus on multi-channel access.
It’s important for insurers to let go of their traditional strategies and learn from their customers, says Bieck. This causes cultural difficulties for non-leaders, many of which still consider communication as a one-way channel for delivering information to clients. Leaders listen, which makes a tremendous difference in accommodating the incoming consumer base.
“The customer of the future is open to new products and new ideas,” Bieck explains. “Millennials are less concerned about price and more about value. At the same time, they are looking for interaction with their providers and with each other.”
Bieck predicts that insurers’ product offerings will change along with communication techniques as consumer demands grow to include increasingly complex solutions and extended services such as security and mobility. About 90% of insurance leaders are investing in customer support and 94% are funding new products and services, compared with 79% and 76% of non-leaders, respectively.
Despite leaders’ progress, Bieck notes that product development is not an industry priority. “We’ve seen a fairly slow development towards value add in insurance products,” he notes, even among leaders. In order to make targeted higher-level services effective, Bieck recommends developing a greater sense of customer needs through analytics.
It’s important that non-leaders become more flexible and proactive – two characteristics that set top insurers apart. It’s tempting to be a fast follower in the insurance industry, says Bieck, but leaders are leaders because they anticipate, and respond to, industry shifts. For example, the insurers that are focusing on customer centricity are 4 to 5 years ahead of those that aren’t.
“The biggest challenge is the accelerating change tempo,” Bieck explains. Customers are rapidly adopting new technologies, he says, and more flexible insurers will be better prepared to accommodate them. “When we see change accelerating, non-leaders will not be able to catch up anymore.”
Kelly is an associate editor for InformationWeek. She most recently reported on financial tech for Insurance & Technology, before which she was a staff writer for InformationWeek and InformationWeek Education. When she's not catching up on the latest in tech, Kelly enjoys ... View Full Bio