Article Synopsis :
The future of the financial services industry is at a crossroads. The landscape is changing as consumers become more connected, regulators tighten their grip on protection, competition is emerging from new directions and the traditional distinctions between different services becomes less clear. Players in the industry must evolve or face extinction and evolution requires them developing new and competitive value propositions.
Confidence is falling
In 2012, this research showed that 41% of financial services firms said they had the digital capabilities they needed. However, by 2018 rather than move forward fewer believe they now have the capabilities required to make this change.
The same is true of views on leadership. In 2012, 51% of the sector felt they had the leadership capabilities required to make the transformation to a digital business. This fell to 41% in 2018.
While banks are moving towards digital transformation, only 38% of banks believe they have the necessary digital and leadership capabilities required.
Insurance is playing catch up with the banks as only 30% feel they have the digital capabilities required and even fewer (28%) the leadership capabilities they require.
Identifying digital masters
The paper identifies a group of high performers that it defines as “financial services digital masters”. What the insurance companies in this category do differently from the rest is:
– To align capabilities on the customer journey and invest in customer intelligence
Insurers must invest in customer intelligence to shift to customer-centric models. The digital masters in insurance are focused on extracting real-time and actionable insights to maximise customer engagement and optimise their products. 79% of insurance digital masters offer customised products to meet the customers’ needs.
The use of open APIs will help the insurance sector to integrate broader and deeper customer data from third party sources such as social media, retailers, smart devices, and even competitors.
– To adopt the collaborative, innovative, and agile operating models.
The insurance sector’s digital masters focus on agile business models. The ethos is to test quickly, fail fast, and learn faster. 63% of insurance digital masters test promising ideas quickly as a proof of concept (PoC) or a minimum viable product (MVP).
– To place both customer and employees at the centre of the culture to help build effective governance structures.
In order to remain flexible, digital governance requires guidance rather than strict rules. 58% of the insurance sector’s digital masters have a digital unit. However, 67% have adjusted role descriptions and key performance indicators to align with their digital transformation objectives.
Mind the gap
There is a growing gap between the average player and what this paper calls the “digital masters”. While banking is finally gaining ground on acquiring digital and leadership qualities to achieve this transition, insurance is struggling to keep pace and is being left.
Only by getting to grips with the key challenges listed above will financial services businesses – and insurers in particular – achieve this objective.
Disruption has already been intense, but there is more to come and digital mastery is the Only way to survive this new environment.
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Digital Insurer's CommentsThis Capgemini report offers cold comfort for the insurance company that is on the verge of starting to plan for its digital transformation.
It is clear that many businesses are no further forward on this campaign than they were in 2012. Some may have even slipped backwards.
It is true that the insurance world is rapidly changing. Those who hope it will be alright in the end are being left behind and that will result in only one outcome: extinction. Unless, of course that business is ‘lucky’ enough to end up in its very own Galapagos Islands – backwater where it can exist as a novelty without interacting with the rest of the world’s insurance species.
The message remains simple – don’t be a dinosaur. Focus on customer experience, processes and fleet of foot business models or accept that evolution just isn’t your thing.
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