Insurance digitalization: how to avoid disapointment?
The study was conducted online, in August 2017, by Simon-Kucher & Partners and asked companies all over the world to answer 30 questions on business environment, digitalization, pricing and sales practices.
According to the study results, of the top 5 reported manifestations of pricing pressure in insurance, digitalization is highly correlated with exacerbating several of the trends. Low-price competition and increased price transparency are top two of these. "Digitalization leads to increasing price transparency, which leads to increasing price pressure. This can ideally be met with improved sales steering through sales processes and better value selling."
In fact, according to study's findings, increasing sales process efficiency and reducing costs proved to be, according 33% of the interviewed insurers, a high investment initiative which only provides for modest results. On the contrary, focusing digitalization investments on optimizing prices with big data seems to be one of most rewarding initiatives as 46% of the poll respondents agreed that it supposes low investments and provides for a high return. Yet, it is interesting observing that for the time being, reducing costs seems to be considered of priority. Although, on the contrary, optimizing prices using big data is the type of initiative with the highest topline impact, it is still an area where investments made by insurers are almost the lowest (11%).
The study concludes that although insurers see great potential in digitalization (91% of all insurers invested in digitalization initiatives over the last three years; rank 2 compared to other sectors), large sums of money invested not in a targeted manner.
Thus, using digitalization as a growth factor is much a matter of better understanding what type of investments should be the most needed and efficient. According Simon-Kucher & Partners, to avoid the Big Digital fail, there 5 things companies' management should take care of:
- Focus digital transformation on delivering topline growth and develop a clear digitalization strategy;
- Invest in data-driven price optimization and monetization of digital offers;
- Invest in professional pricing resources who use Bog Data to support price decisions; do not start price wars;
- Improve your customer segmentation and sales process, thus avoiding automatic ineffective processes and allowing salesforce to engage with the right customers;
- Make digitalization a C-level responsibility, not leaving it entirely to the IT team.
The "Digitalization - the Great Disappointment: Why insurers are investing, yet barely have anything to show for it" survey is available here.