Article Synopsis :
The digital revolution that has transformed the way consumers buy music, hail taxis and communicate with each other is catching up to the life insurance industry.
“Harnessing the power of digital in life insurance“, from McKinsey quantifies the chronic under-investment by life insurers and suggests most carriers will have to quadruple spending on digital technologies to boost revenue and bottom line against these significant headwinds:
- Market penetration has been declining for the past 30 years and real growth between 2005 and 2015 has been negative.
- Annual sales of new policies have dipped from about 17 million contracts in the 1980s to ~10 million today.
- There’s growing competition from non-traditional players — including banks, wealth managers and brokers — that don’t have an insurance focus and may be looking to steer clients to alternative vehicles.
Per the report carriers must digitally transform each step of their business including:
- Product development – Creating need-based products with the help of big data and analytics
- Marketing, distribution and advice – Building capabilities in online advisory and lead generation through analytics and online sales
- Purchase – Digitization can help solve the delays in underwriting providing consumers with quick turnarounds with respect to policy purchase
- Service and Claims – Digitization of end-to-end claims saves time and costs with improved accuracy
- Customer Engagement – Engaging customers with predictive analytics leads to cross-sell opportunities geared to customer needs
McKinsey suggests five core areas for strategic investment:
- Digital Strategy – Organizations should have a long-term vision for overhauling existing business operations prioritized across three areas :
- Digitizing the existing business.
- Building digital capabilities that can differentiate their business proposition.
- Pursuing disruptive digital innovation.
- Digital Value Capture – Insurers should target three areas to deliver value:
- Building an integrated digital front office.
- Digitizing operations and customer experiences.
- Creating an environment where parts of the organization can experiment with new business models.
- Foundational Digital Capabilities – Coordinated investments in IT infrastructure, cloud, advanced analytics and user-friendly experience design
- Digital Culture, Talent and Organization – Coordinated investments in cross-collaborative teams; structure and leadership, talent and skills
- Digital Integration Roadmap – Build an integrated roadmap with clear prioritization criteria and sufficient flexibility
Most established carriers, per the report, fall short in the implementation of digital strategy for lack of a clear vision. McKinsey outlines four models for short and long term planning as a reference in the creation of winning digital strategies:
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