Last week, German shoppers at the Rewe supermarket in Cologne began filling their carts and leaving the store without checking out. Rewe is testing a groundbreaking process by Trigo, a technology provider that has consolidated cameras, scanners and AI technology, to practically see customers shop and leave. They then charge them for their purchases. [i]
Digital technology and automation will drive the future. "Pay-as-you-live" technology, "Protect-as-you-go" and "Prevent-as-you-live" insurance are starting to attract companies' attention. Today, customers pay exactly where they are, often without opening a wallet. They ask Alexa to do their research, buy and pay. They talk to their cars and their cars intermediaries for those with voice recognition and digital connectivity. In September 2020, Juniper Research released its report on vehicle payments and predicted $ 86 billion in payments in 2025 through embedded vehicle systems, an increase from $ 542 million by 2020. [ii]
Meanwhile, phone apps keep track of what we eat, how we sleep, how we train, capture our taste in music and they predict our next steps and suggest answers in an attempt to save us time through automation. Wearables see us go and assurances like John Hancock Vitality stimulate healthy behavior.
Does the world actually spin faster or does it just feel like it?
In one year, we have reached the speed of digital development with some insurance companies flying ahead of the industry and others still back at the starting line, asking technology if it's okay to engage in hyperdrive.
Reality: The world of digital engagement IS spinning
According to a new KPMG survey, 48% of CEOs say that the pandemic has greatly accelerated progress in creating seamless digital customer experiences. [iii] In the same group, 54% invest more in customer-centric technology. This is happening at a time when many companies have struggled to keep pace with the demand for digitization, especially as customers have accelerated their adoption of digital in almost every aspect of their lives, as shown in Majesco's customer survey. Next week, Majesco releases its latest thought-leadership report, Digital Insurance: The Inflection Point, a deeper dive into the 2021
Pre-COVID digital initiatives highlight a growing gap
Even before COVID, many industries were in various stages of digital transformation. McKinsey research over a number of years showed that industries that adapted to the digital age had better economic results in terms of growth and profitability. These organizations had future-ready, digital business models, underpinned by next-generation technology, including platform and digital technology such as clouds, digital experience platforms, AI / ML, APIs, ecosystems and more. These organizations proved to be more resilient and experienced growth during the crisis noted in Figure 1.
Figure 1: Average economic profit per industry (McKinsey)
McKinsey research identified what they call an "economic profit gap", which became clear in 2010 and has increased since then. [iv] COVID has accelerated these trends and widened the gaps between top (leader), middle (follower) and bottom (laggards), consistent with the Leader-Follower-Laggard gap from our 2021 research on strategic priorities. What is remarkable is that leaders have robust digital business models that support online purchasing and service. Insurance as an industry is within the laggard group and highlights the industry's challenges to accelerate their digital transformation.
Some insurance executives have been early people and innovators – like Progressive, while many are still behind the curve. At the same time, we have seen InsurTech start-ups emerge with highly digital business models such as Lemonade, Metromile, Next, Haven Life and Ladder Life that are constantly renewing and raising the bar.
Insurance companies need to invent themselves as technology-forwarding companies that can deliver customized products and highly personalized services to meet new customer expectations and keep pace with new digital leaders. What are the new features that will make wow customers and the new products that will protect in the meantime?
In future, insurers must support multi-channel commitment; adopt platform technologies including clouds and APIs to support increased real-time data exchange between systems; use advanced digital and data analytics to reconsider insurance embracing ecosystems for access to data, distribution channels and digital capabilities from a growing range of partners; and implement digital experience platforms to build the next generation of customer experiences. These features must leverage the next generation of core technologies to realize the value of digital transformation.
In this year's research on strategic priorities, we took a deeper dive into some of these digital opportunities to assess where insurers focused their time and resources and to understand where they lead, follow or lag compared to colleagues. Encouraging, insurance companies are focused on customer service solutions, but lag behind in other areas. Although they may be focused on these areas, the question is, are they using the next generation approach or are they still using the past weakened approach?
Who and what drives digital?
First, there was the introduction of the Apple iPhone. Then it was COVID. Both of these "events" are important turning points that shifted the industry to digital and then accelerated the shift, which is reflected in Figure 2.
Customers drive the shift, from changing demographics to new behaviors and expectations. This shift has created an "outside-in" view, the transition from a transactional focus to creating a holistic, compelling experience. Our customer survey for car and life 2020 highlighted this shift. Unfortunately, current customer experience is fragmented, inconsistent and at best difficult because they are forced to interact with different "portals or apps" to complete everything from service and invoicing to receivables. Over the past decade, insurers have become "portal-happy" – creating portals for all types of transactions, not only for customers but also for distributors.
The result of various portal developments is layers of solutions that create a maze of confusion, cost and dissatisfaction.
Figure 2: Turning points leading to the digital enterprise
Changing customer demographics, behaviors and expectations accelerate the demand for a holistic digital experience.
- Forrester recently stated that interactions with digital customer service will increase by a further 40% in 2021. [v]
- Gartner says corporate customers are developing a strong preference for B2B self-service, with 44% of Millennials preferring no human interaction. [vi] (McKinsey also repeats this.)
- According to both the Forrester study and KPMG's CEO Outlook survey, almost 75% of organizations believe that a seamless customer experience is a top or high priority that supports their digital transformation .
The status quo of the industry is rapidly deteriorating. The insurance is changing from a growing range of influences, upward decades of business assumptions. In this new era, insurance must be digital across the full spectrum of possibilities, from the front to the back of the insurance business.
Which digital way will improve our competitive advantage?
A recently published article, "Disrupted: Challengers Finally Surpass Existing," by Commerce Ventures, a leading venture capital firm, found that it took COVID-19 less than a year to change consumer behavior so drastically and accelerate the adoption of digital features so quickly that the retail, payment and banking industries (among others) were fundamentally transformed from how we used to know them. [vii] Incredible amounts of change that would normally take years were compressed into this much smaller time frame. Some examples of these three areas cited in the article include:
- Retail: E-commerce grew more than 40% during the pandemic.
- Payments: Payment Processor Square estimated that the size of COVID-driven one-year decline. in cash use would normally have taken three years under normal circumstances.
- Bank: Digital sales went from 25% before the pandemic to 75% during COVID.
The rapid adoption of digital technology for shopping, payments and banking at home-bound consumers and employees of the company has also led to an upset in the balance of power between entrenched established and new challengers in FinTech. For insurers, this marks a complete change in the digital landscape.
Like the compressed and accelerated changes in customer behavior, the magnitude of the changes in market power that we have seen over the course of a year would probably normally have taken a decade. The evidence is seen in the dramatic increase in business results experienced by some of these challengers, including these examples highlighted in the article:
Retail: Instacart Grocery Delivery
- Delivered more food early in the pandemic than the established Walmart, Kroger and Albertsons .
- Revenue was $ 1.5 billion, up 300% from the previous year.
- The market valuation exceeds the market value of Kroger and Albertsons.
- Increased the number of active Cash App users by 50% compared to the previous year, which accounts for 45% of gross profit.
- Doubled its revenue from 2019 to 2020.
- The company value exceeds the values of the three largest payment processors.
- Driven by COVID's protection – instead, consumers flocked to retail investments, which led to growth for platforms like Robinhood. In June 2020, Robinhood's daily trading volumes beat all other stock exchange platforms. Current registered accounts are 20 million.
- Its market valuation is estimated at more than $ 40 billion.
What does this mean for insurance?
We have begun to see the shift both during and after COVID, with increased digital life insurance sales from start-ups such as Haven Life and Ladder Life, and the transition to use-based car insurance with more and more customers switching to insurance companies that provide it. What has happened in other industries is starting to play out in insurance. This emphasizes that traditional insurance companies must immediately start planning, investing in and implementing their digital transformations across a wide range of functions. Think about almost all digital advances in other industries and you can imagine results in insurance.
"Alexa, turn off the living room lights."
Why not, "Alexa, turn on my car insurance." or "Alexa, what is the accumulated value of my life policy?"
… or for business insurance, "Alexa, we have added four trucks to our fleet," or "We lost refrigeration in our warehouse. I want immediate help to minimize the claim and make a claim."  These scenarios may seem far-fetched to some, but they are real to some and represent the path to which digital engagement leads us.Of course, some of the biggest and most valuable digital enhancements and automations will use AI to address many issues with even less customer-oriented communication and more back-office communication.Insurance processes, protection and access to value-added services will be "built" into customers' lifestyles and business lives.This type of administration-reducing digital capacity will mean a much more holistic digital transformation that enables efficiency. image digital focus because it can not be covered with paragraph enhancements.
What would Alexa say if you asked these questions … Is your organization ready for a greater focus on enterprise-wide digital transformation? Are you ready to use digital in your attempt to become a competitive and relevant insurance manager and achieve the profitable growth that comes with it?
Set up Majesco's May 27 webinar, Customer360 – Create an Enriched Digital Customer Experience, and be sure to download our upcoming Thought Leadership Report, Digital Insurance: The Inflection Point, for insights on how your organization can adopt a new digital model for insurance leadership.
[vi] "Gartner says 80% of B2B sales interactions between suppliers and buyers will occur in digital channels 2025," Gartner, September 15, 2020, https: //www.gartner .com / en / newsroom / press releases / 2020-09 -15-gardener-says-80-of-b2b-sales-interactions-between-su [1 9659004] [vii] "Disrupted: Challengers Finally Survive Existing," Commerce Ventures, May 4, 2021, https://commercevc.medium.com/disrupted-challengers- finalally-overtake-incumbents-b291b4d47465