Customer demands becoming market’s major challenge
Insurers would be facing the challenge of how to capitalise on the growth potential created by a growing middle class, longer living population of customers, at the same time grappling with disruptive impacts of new technology, regulation and fast changing customer expectations.
These change would disrupt growth trend of individual companies, and those that fail to respond to new transformational would be over-taken by their peers in a competition, which analysts say would be very fierce.
Analysts at PwC in its 17th Annual Global CEO Survey on Insurance industry say insurers must capitalise on these transformational trends and move out into the front of a rapidly changing marketplace to remain profitable.
They say that a key defining feature of a successful organisation is its ability to connect with customers in an intuitive, proactive and strategic way. This changes insurers’ role as developer and seller of products through separate design, marketing and distribution silos (‘inside-out’) to responding to customers’ needs and expectations by working ‘outside-in’ to create the right solutions.
An outside-in approach brings together various elements of risk management advice and insurance coverage, rather than promoting a particular product. On the life side, this can be a combination of wealth management, medical coverage, and gym membership to aid health and well-being. On the non-life side, it can include a combination of fire safeguards and fire cover as part of the property package.
This approach typically requires insurers to break down the barriers between different functional silos in order to create more collaborative and customer-centric engagement.
They also argues that telematics, big data, and other new analytical techniques can help insurers to develop a better understanding of customer behaviour, needs, and risks, thereby enabling them to provide more responsive products and more competitive rates while still sustaining margins.
“This foresight also can help clients gain a better understanding of their own financial situation and which products best match their strategy and goals,” the analysts said.
Besides that, as digitisation allows customers to dictate how they want to do business and strips away the barriers to market entry, insurers can no longer wait for rivals and incomers to make the first moves.
“From a systems perspective, the biggest single problem is that upgrading a complex ‘industrialised’ infrastructure that could take several years to complete, by which time the market will have moved on.
One way of achieving digital competitiveness is to establish start-ups that run alongside existing capabilities. These ‘greenfield’ operations could be up and running quickly and then tested, adapted and expanded to meet rapidly evolving demands. This approach would allow much greater flexibility and room for innovation on the one side, while reducing costs, design and execution risks on the other.
People they say it is an important aspect of the change. A more customer-centric approach is going to require people with the analytical skills to understand customer needs and the relationship skills to engage with them over the long-term. But limited availability of these skills continues to be a concern, and nearly 60 percent of insurance CEOs see it as an organisational threat.
“The number one threat to the insurance business is your ability to attract and retain knowledge. It’s a knowledge-based business. If your resources are not knowledgeable and they’re not willing to work for you, that’s a big threat,” says Arch Capital’s Dinos Iordanou.
“So we do a lot within Arch to not only attract but also retain the best people that we can get our hands on. And we also supplement that with extensive training by bringing in young graduates and trying to provide the expertise necessary so they can grow with our businesses,” Iordanou added.
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