Australian insurers are facing a perfect storm of profitability pressure, customer demand for digital services, increasing regulatory oversight, industry consolidation and potential competition from data and digital-savvy companies.
ROADMAP FOR TRANSFORMATION
DXC Technology director and general manager of insurance in Australia & New Zealand, Dr Michael Neary says addressing these competing priorities requires a clear road map for digital transformation and an ecosystem of supporting platforms and partners.
Neary says the company’s research study, Australian Insurance 2019: Data, reputation and loyalty in the digital age, shows many people are willing to engage digitally with their insurer.
‘Forty-seven per cent of Australians would be comfortable downloading and using an app from an insurer,’ he says.
‘However, their expectations for usability are high, with almost half of those surveyed expecting that using the app would be as easy as using Facebook or Instagram.’
ONLINE INTERACTION PREFERRED
Around a third of those surveyed by DXC Technology prefer online to human interaction.
One-third of respondents identified digital claims processing as a technology factor that would improve their loyalty, and 40 percent felt their insurer needed to use technology to improve claims handling.
Further, two-in-five are comfortable using chat bots to make claims or apply for insurance.
‘We are confident that the time for digital insurance is now,’ Neary says.
‘If insurers don’t start addressing the digital demand now, they face disruption given the perfect storm and the consumers’ willingness to move business elsewhere.’
CONSUMER TRUST IS LOW
However, a key finding of the survey was that the industry’s current reputation could hinder the growth of digital insurance from incumbent insurers as most respondents expressed reservations in providing them with data.
‘Data is key to growing a digital footprint, but only 49 per cent of those surveyed trust the insurance industry to securely hold their personal information,’ Neary says.
‘But less than 50 per cent say they trust an insurance company will only use personal data for what it is intended for and less than one third trust the insurance provider has their best interest at heart.’
‘These findings are important, because as an industry, we need to build the trust of our consumers, so that we can enable a digital future.
‘So while our findings indicate a desire to go digital, paradoxically it shows that insurers may struggle to get the data required to support their digital aspirations and customer needs.’
THE WAY TO MARKET RELEVANCE
Neary also warns that if the industry isn’t trusted with the data needed to be relevant in the digital age, the insurance market will face challenges in understanding their clients, building a long term relationship and make better informed decisions.
‘One only needs to look at payments to see how the likes of apple, Facebook and alphabet are leveraging their trusted position to branch into financial services,’ he points out.
According to Neary, the good news is that technology can improve consumer trust by increasing transparency and empowerment.
‘Technology can facilitate better personalisation using existing data while digital processes can increase efficiency and lower premiums,’ he says.
‘The use of technology can also help insurance fit into the customer’s broader journey and ecosystem rather than being an ancillary step.
Neary says technology allows greater transparency to the calculation of premiums, including risk mitigation and strategies to reduce premiums.
‘Finally, a digital process can improve the claims experience and give customers a greater sense of choice and participation.’
PERSONALISATION IS KEY
The importance of personalisation online was a significant finding of the survey.
‘Of the non-financial factors influencing choice and loyalty, personalisation ranked highest — twice as high as having an assigned personal agent,’ Neary says.
‘We know that personalisation is important to Australians. They want to be treated as individuals, not served up generic products and content.
‘They want meaningful information, something that is relevant to them, their location and circumstances. They don’t want to just be told to read the FAQs or read the PDS.’
Neary says DXC Technology believes personalisation is a strength of the Insurtech community.
‘For example, we’re working with Guroos, which offers a Dynamic Personalised Interactive Video (DPIV) service.
‘It provides customers (viewers) with unique, engaging and cut-through content through an insurer’s primary communication delivery channels.’
Neary adds that a surprise finding was the customer need for the personalisation of services includes person-to-person interactions.
‘Clearly, there’s still a way to go in treating customers as people rather than as a policy holder or a claimaint, he says.
IMPROVING INTERACTIONS WITH DATA
Neary asserts that technology can be used to create a more personalised service by using the data the organisation has in the company wisely.
'There are multiple touchpoints throughout the customer journey where using technology can improve interactions.
'For example, rather than asking for a policy number, technology could prompt the Customer Service Representative to say, "are you calling about your home or auto policy?"
‘Many industries have solved their service issues through self-service, insurers need to accelerate their digital programs while retaining the empathetic human touch at critical moments in the customer journey,’ he says.
‘We can use also use the data on our customers to ensure that we’re talking to them around relevant offerings and insurance needs.
ATTITUDES TOWARDS PREMIUMS
The survey’s findings on attitudes towards premiums were also notable.
While respondents generally expected to save an average of 16 per cent on policies from digital insurers, one-third thought premiums would rise on average by 13 per cent.
‘This could indicate that customers understand the basis of risk selection and underwriting in insurance at some level,' Neary says.
'It appears that customers understand that by providing more data, premiums will be fairer. While most customers expect lower premiums, it’s clear that some expect higher premium given their risk profile.
‘More data means more accurate rating and in theory fairer premiums. Alternatively, it could show an expectation that the cost savings in digital would be passed on to the customer. It’s an area we aim to explore in the next study.'
Neary says 2020 marks the 50th year of DXC Technology support for the Australian insurance industry.
‘It is important we continue to understand the insurance consumer, so we can assist the industry to adopt the latest technologies that will allow them to keep up with consumer expectations,’ he says.
'We therefore do expect further studies to be conducted. The studies we do help the industry harness the power of innovation to create a customer-centric future.
He reveals that DXC plans to further explore the propensity to share data and aims to develop an index for reputation.
‘As with the first study, we’ll be reaching out to industry participants to see what areas they would like DXC to explore further,’ he says.
There are also themes from the first study that Neary would like to see the company build on.
OPPORTUNE TIME TO UNITE
The DXC study finds that 67 per cent of respondents would not recommend a role in the insurance industry, and the majority think the number of successful claims is around 60 per cent.
'As we know, the true figure for successful claims is 95 per cent,' Neary says.
'There is clearly a need to step back from the challenges upon us and shift this perception by acknowledging the achievements and accomplishments we do every day.
‘This is an opportunity for the industry to unite and communicate with consumers; to tell them how we are improving and what we are doing to make the industry better.’