The insurance industry is “a long way behind” some of the other industries when it comes to service and digitalisation. Mr Paul Robinson, Director, Insurance Growth Markets, IBM, discusses the urgency for transformational change, how to go about it to get a complete view of its customers, and the “de-risking” an able partner can provide in the process.
Consumers have digitalised ahead of the insurance industry, and insurers are being forced to play “catch up”, said Mr Robinson.
Senior insurance executives have noted that customers are acting very differently – they are smarter and more demanding. Increasingly, one question that he often gets from these executives is – “Will mobile kill the life agents?”
Agent model needs to change
“There is a recognition from Asia Pacific’s insurance industry that the existing agent model is struggling to respond to change. Particularly, the change around customer behaviours,” he said.
But it is clear from IBM’s primary research on consumers across the region that at the end of the day, and irrespective of their pre-purchase behaviours, people still want to buy insurance from a person. The idea that the life agent model will disappear is false, said Mr Robinson. “What will happen, is that there will be a change in the way that the model operates.”
As consumers go digital, insurers need to help their agents to catch up with that digitalisation and also provide them with the necessary tools to help them service and meet the demands of the new group of consumers.
A good starting point is to arm agents with timely, relevant information through improved analytics. A good example of this is the sophisticated but easy to use “retention application”, jointly developed by the Apple and IBM partnership, for the iPad and iPhone mobile platforms. Bringing the agent into the internal insurer processes through modern sales tools and high function portals to quote, complete new business, and then service the consumer has become a critical, pragmatic “must have” capability.
A leading life insurer in China has taken this a step further, enabling their agents to operate a mobile “virtual office” – even across the remote rural western provinces – while remaining integrated into the overall insurer operations.
Having experienced different ways of being served in other industries such as retail and banking – “the banks have digitalised considerably and positively over the last couple of years” – from a mobile and technology perspective, consumers are also demanding and expecting more from the insurance industry, which is regrettably “a long way behind some of the other industries”.
Diverse needs within Asia Pacific
For companies operating in various countries in the region, Asia Pacific is obviously not one homogeneous market. “The region consists of different countries which exhibit different positions in the market in terms of level of maturity, regulatory environment, and the ability to engage with new technologies.”
So MNCs need to segment and cater to the different markets. For example, in “mature growth markets” – Singapore, South Korea, and Australia – the challenge is in remaining relevant as many of the products become commoditised and how an insurer effectively differentiates itself from the competition. Hence, insurers in these markets are typically more focussed on profitable growth and customer retention.
In “competitive growth markets” such as Malaysia, China, and India, where the growth opportunities are very significant and where insurance penetration rates are low, it is about winning the battle for distribution in an optimised and operationally sound way to build profitable market share.
Then there are countries like Philippines, Vietnam, and Indonesia, in the third group of “undeveloped markets”. These exhibit high levels of growth from a very low base. “This is where you begin to see insurers struggling to deal with some of the regulations in these markets,” said Mr Robinson. “As markets begin to mature, they can be very volatile and, sometimes, very intrusive regulation platforms are being put in place.”
And the challenge for insurers is to be able to cater to the specific needs of these different markets. Sometimes even in countries where consumers may be considered as immature insurance markets, they may be very advanced and savvy digitally. For example, Jakarta in Indonesia, is the most socially active twitter city in the world; it also has the fourth largest Facebook population and mobile phone penetration is at 115% – people have more than one mobile phone per person.
True customer centricity
What these characteristics and changes mean to the industry is that there must be customer-centricity. “There is an intolerance towards mass market and commoditised approach,” he said.
“While many insurers speak about customer-centricity, true customer-centricity must happen through the eyes of the consumers in terms of how they want to be treated,” he added.
Customers want control. They want the right information, the right offers, at the right time. They want to choose the channel or medium that they prefer and the option of being able to select detailed and personalised advice when making a purchase or just being able to make their purchase and move on. And whichever contact point or option they choose, they want the process to be smooth and for the insurers to retain knowledge of them as an individual.
The challenge for insurers is therefore to optimise a multi-channel distribution model that integrates customer service seamlessly across a combination of agents, brokers, bancassurance, web, mobile, contact centres, self-service kiosks or ATMs and non-traditional distribution partners.
Such centricity can only happen through the improvements in process and insights gained from leveraging and integration of technology around areas such as data analytics, cloud, shared and managed services, mobile technology, and social media.
Ecosystem of partners
So how does one deal with the “explosion of technology” and find the most suitable technological strategies relevant to its needs in the different markets?
Mr Robinson noted that in an insurer’s execution of its “transformation activities” in the digital space, one of the key issues is in “trying to get value for their IT spend”.
“There are a lot of costs associated with just ‘keeping the lights on’ for many companies which have been set up over a number of years. It is all about freeing up some of these IT costs to enable a company to spend more on what is really important and what will differentiate it in the market place,” he said.
“But that is a difficult thing to do as an insurance company, when you are focussed on not only running the day-to-day operations but also making substantial change within the organisation,” he added. “It is forecast that 30% of revenue will come from mobile and social media business platforms. Are life insurance companies ready for it?”
The good news is that an insurer does not have to go at it alone. It can work with an ecosystem of partners in its innovation and transformation process to get technology to deliver business values without adding complexity to an already complex organisation.
Key lessons learnt
While transforming and preparing the business for the new environment can be unnerving and overwhelming, through Mr Robinson’s engagement with and experience in helping senior insurance executives in the process, he said there are a few key lessons that can be learnt.
Any transformation has to be business-driven with leadership setting the agenda. “You really need to think about transformation at a more granular level than just the overall organisation, particularly if you are a multi-national insurer across Asia Pacific, where you have got different challenges in different countries. What differentiates you in the different countries? Where do you need to focus your energies and where can you leverage in the context of the region where you can implement once and roll it out many times?” said Mr Robinson.
Successful insurers are going to stay focussed on the key fundamentals to drive profitable growth. Technology will enable the business to undertake that change and strengthen its core platforms to build the new foundation where a series of new technology such as analytics, collaboration, mobility, social media and cloud can be leveraged. These technologies have to be implemented in a way that really supports the new business model that an insurer is looking to transform to.
Complete view of the customer
There is no one-size-fits-all solution. Each company needs to look at and focus on what is important to them. This will differ depending on where they operate and how they operate, he said.
The importance of establishing a modern IT infrastructure and systems to support areas including internal channel management and external multi-channel optimisation of the insurance company is critical and is one that is often overlooked.
“You’ve really got to think about consolidating your IT infrastructure and consolidating your customer information architecture to ensure you have got a complete view of the customer. You can then begin to think about how you build new and more innovative marketing and campaign management programmes across your channels – whether online, email, outbound, call centres, agents or selling through banks,” he said.
“And importantly, insurers need to understand that they can’t do everything. Insurance leaders are paid to grow the business profitably and manage risk for their shareholders. The key is to prioritise, focus, and ‘de-risk’ with the right partner,” said Mr Robinson.
Choosing the right partner
While transformation needs to be driven top-down by the leadership group, assistance is needed from a partner who has done it before, who can bring the required knowledge and skills, and risk mitigation capabilities to help the insurer implement and manage the process of this transformational change. “Working with people who have done it before is a major way of ‘de-risking’ the issues associated with major transformational change,” he said.
Also, a partner who has the scale and capability is needed, especially for a multinational insurer to access those skills in the countries where it operates.
And IBM with its ability to bring a proven “ stack of capabilities” – whether hardware, software, services, and industry knowledge – to the table, focussed on transformation, is an ideal partner.
It is in IBM’s DNA to support large complex enterprises in their business and technology transformation process, said Mr Robinson. While others may have jumped in and focussed on areas such as social media, cloud and mobile in silos, insurance companies will always have a hybrid world as evidenced in areas such as traditional channels and mobile channels of distribution, and legacy systems and cloud. “IBM has invested heavily to support large and complex enterprises in this new hybrid world, making us an ideal partner for insurers,” concluded Mr Robinson.