Carriers are poised to join the ranks of industries transformed by the digital revolution. But they're constrained by legacy systems, processes and internal cultures, and often lack the internal skills to integrate digital into their operations and strategies.
This overview comes from an Accenture survey of 41 major carriers. The respondents understand the power of digital and are eager to make acquisitions to strengthen their digital presence. But adaptation will likely be gradual as they attempt to rethink their business models to embrace digital components.
"It's critical that insurers should not fall into the trap of simply digitizing existing channels by creating upgraded, digital, or mobile-friendly versions of existing products and services," said Jean-Francois Gasc, a managing director for insurance within Accenture Strategy. "To unlock the full benefits of digital technologies, a change in mindset is required. This paradigm shift requires insurers to continually think from the customer's perspective — that is, outside-in rather than from the company outward. Insurers need to fundamentally change their business models to become digital businesses that are truly customer-centric and that provide consumers with solutions rather than just products."
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The survey found that, of those who participated, 59 percent see digital acquisitions by industry competitors as highly likely.
"In fact, 43 percent of insurers surveyed have already acquired startups or are planning to do so in the near future to better capture digital opportunities … [and] 75 percent of insurers believe that digital will transform their industry within the next five years," Accenture's release said. "Telematics companies, insurance price comparison websites and analytics firms are the other most cited acquisition targets, mentioned by 47 percent, 43 percent and 38 percent of the executives surveyed, respectively."
When asked what's holding them back, here's how the answers sorted themselves out:
- 42 percent cited legacy systems.
- 30 percent cited lack of internal skills.
When asked about their strategies, here's what came back:
- 21 percent said they had no clear digital strategy in place.
- 33 percent said they had a strategy but it was limited to specific areas of the business.
- 60 percent of insurers view their investments in digital as "exploratory."
- 22 percent described their investments as "focused on driving truly disruptive innovations."
(Their responses exceed 100 percent because of the distinction between exploratory and focused.)
"Less than half (47 percent) of respondents have a digital strategy in place that covers the entire value chain — from product creation to claims management, including sales and distribution, underwriting and customer relationship management," Accenture said.
Nonetheless, they're targeting big bucks to buy their way into the digital world.
"P&C insurers are planning to spend an average of $47 million in digital investments over the next three years while life insurers plan to invest an average of $40 million," Accenture reported.
Among other key survey findings:
- Insurers already have made investments in digital areas including mobile communications and apps (68 percent), data mining and predictive modeling for fraud prevention (59 percent) and social media monitoring (54 percent);
- 29 percent of insurers expect premium growth to come from the expansion of their customer base through the use of digital channels;
- 25 percent of the executives surveyed claim to have a single view of the customer, a key element of almost any comprehensive digital strategy.
Nearly three-quarters plan to create new distribution partnerships, and of those, the survey found, 69 percent are considering partnering with banks, with others primarily citing technology companies such as Google or Facebook as potential partners.
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
