Insurance companies need to get closer to their customers and compete with Amazon, Zalando and the like. Because e-commerce remains a pioneer in terms of digital business models.
The vast majority of insurance companies are aware that they must increasingly digitalize their business in order to meet policyholders' needs for greater flexibility, individualized products and prices. "Digital" needs to become a part of the company DNA and that starts with the development of new insurance products. At this point, digital startups and insurtechs can not only be a threat to the traditional business model, but on the contrary, they can also be an opportunity in terms of partnerships and cooperations.
Basically, insurance companies would do well to think outside the box, at the customer orientation and customer experience of omnichannel-oriented e-commerce companies. Successful players address the "pain points" of their customers. You can make a comparison: Does Amazon or Zalando have know long waiting times, confusing forms, incomprehensible contract clauses and conversations with different departments? Simplified and improved processes to the customer interface are therefore rightfully the focus of digitalization for most insurance companies, as a study by the market research and consulting firm ISG from last year also states.
The pandemic has revealed digitalization potentials
This development is certainly reinforced by the fact that consumers during the pandemic have recognized the opportunities that digitization offers, both for collaboration and for private consumption. The decentralized demand for (digital) products and services will therefore increase. Insurance companies are already reacting to this, but it is often due to the structure of established insurance groups that change, which does not necessarily have to be disruptive, takes time.
Obstacle of a heterogeneous IT landscape
"Many insurance companies resemble large tankers instead of speedboats: a heterogeneous IT landscape that has developed and grown over decades cannot be turned around and modernized 'in the twinkling of an eye'. For many insurance companies, the challenge remains to modernize legacy IT and transform analog processes into a digital reality. It is certainly due to the scope of such projects and also to a lack of internal resources that many insurance companies are not yet as far advanced as they wanted to be a few years ago," writes our colleague Karsten Schmitt in an article for the German insurance webzine Versicherungswirtschaft-heute. He's rubbing some salt in the wound with this!
Innovation, digital transformation and new digital business models will only succeed if enormous modernization efforts take place in the "back end". Frontend is beautiful - backend is Key!
"Insurance companies are already investing in modernizing their IT, but so far mainly at the front end, probably because of better visibility," Björn Münstermann and Jens Lansing of McKinsey report in an article for the trade publication Versicherungsbetriebe. "That won't be enough in the long run: to exploit the potential, IT systems must consistently meet minimum requirements, including enabling real-time data access and agile development, for example. In short, we need to comprehensively modernize the core systems."
Connectivity as the "next big thing"?
IT modernization will also be a prerequisite for the "connectivity" trend predicted by management and technology consulting company BearingPoint. In the study "Insurance 2030", the most important trends and their potential impact on the insurance industry were examined. The result is a vision for the year 2030, and one of the megatrends of the future examined is connectivity. The study states that in the future, insurance products will only work on the basis of connectivity, because it enables, for example, a more precise and individualized assessments of risks. This offers huge potential for new innovative products, especially in the areas of loss prevention and risk protection. Connectivity has a direct impact on almost all areas of life and will also accelerate other megatrends such as automation and individualization. According to the BearingPoint study, the successful insurance company must therefore not only successfully accompany the trend towards digitalization, but at the same time radically rethink, adapt to the new world and, above all, collect and evaluate a mass of data and draw the right conclusions from it. The number of Internet-connected devices per person is steadily increasing, and in just a few years, an average of four electronic devices per user will be networked online. This will revolutionize communication between people and with machines and artificial intelligence, and will also further increase automation and individualization.
Backend is key
Customers spoiled by e-commerce want solutions to their needs anytime, anywhere and from any device. Omni-channel presence, real-time response and high transparency are key points for insurance companies and a prerequisite for future viability in an increasingly digitalized society. All of this will not succeed just by putting some "makeup" on the front end! The backend is the key to future viability in a rapidly changing market, where the German coffee roaster Tchibo already sells car subscriptions that already include the corresponding insurance. By modernizing legacy IT, coupled with the use of standard software, insurance companies can successfully shape the digital transformation and provide the right answers to customers' needs.
Would you like to talk about the topic of "digitalization in the insurance industry" and learn more about how the use of standard software can help? Then please contact our expert Karsten Schmitt, Head of Business Development.