The time has come for insurers to transform, or disappear

Dis­rup­tion has been a talk­ing point in busi­ness since the turn of the cen­tu­ry. Dire warn­ings about how fail­ure to trans­form will con­sign a busi­ness to the waste bin of his­to­ry came thick and fast.

And it hap­pened. Chal­lengers emerged in many sec­tors and made whole busi­ness mod­els redun­dant across enter­tain­ment, retail, trav­el and more. How­ev­er, the finan­cial sec­tor, and espe­cial­ly insur­ance, has remained insu­lat­ed from the need to change.

The com­plex­i­ty of region­al rules and reg­u­la­tions, the sheer size of long-estab­lished banks and insur­ance com­pa­nies, the trust that finan­cial brands have built up over years and the wish for a point of human con­tact com­bined to keep dis­rup­tors at bay.

But this could eas­i­ly change. Now the per­fect storm has arrived for the insur­ance sec­tor, catal­ysed by COVID-19. The com­bi­na­tion of the increas­ing use of mobile for research and trans­ac­tion, the mount­ing num­ber of hours we all spend online – accord­ing to Ofcom, adults are spend­ing on aver­age four hours a day online com­pared to 3.5 last year — and the desire to com­plete an end-to-end cus­tomer jour­ney online (espe­cial­ly among younger cus­tomers) has put pres­sure on banks and insur­ers to under­take whole­sale dig­i­tal trans­for­ma­tion.

Customers demanding more from insurers

The seam­less cus­tomer expe­ri­ence con­sumers have enjoyed else­where, from order­ing via Oca­do to sit­ting back to watch Net­flix, has height­ened expec­ta­tions of what a superla­tive ser­vice should look and feel like.  The for­mal­i­ty of a face-to-face meet­ing and the need for phys­i­cal doc­u­ments and end­less form-fill­ing to set up a life insur­ance pol­i­cy sim­ply does not fit these expec­ta­tions, with 57 per cent of pol­i­cy­hold­ers telling us they pre­fer to com­plete the process online.

The pan­dem­ic has put points of fric­tion and frus­tra­tion firm­ly in the spot­light and cre­at­ed an abrupt rup­ture that means grad­ual change and five-year plans are no longer viable. Cus­tomers who want­ed to check or alter insur­ance agree­ments quick­ly after lock­down were left adrift. Peo­ple who want­ed instant access to advice and a speed­i­er process as their cir­cum­stances changed dai­ly dis­cov­ered it was not so easy to arrange mat­ters remote­ly, that’s if they could find cus­tomer ser­vice per­son­nel.

The undeniable “cool” factor of challengers

The pure-play insur­ance providers have sign­post­ed the way ahead.  Com­pa­nies like prop­er­ty insur­er Lemon­ade have devised fric­tion­less expe­ri­ences with easy-to-use dig­i­tal tools that help get the task done quick­ly. Even the lan­guage is plain and direct — ‘Lemonade’s cov­er­age pro­tects you and the stuff you own at home.’

Mon­zo has just launched its pre­mi­um ser­vice which comes with phone and trav­el insur­ance. Lega­cy busi­ness­es like Saga, LV= and Post Office already offer such prod­ucts, but the online chal­lenger will bring inno­va­tion, a fanat­i­cal focus on cus­tomer expe­ri­ence and a cer­tain ‘cool’ fac­tor they can’t match.

If lega­cy insur­ers are to remain com­pet­i­tive they need to speed up trans­for­ma­tion plans to intro­duce automa­tion and tools and plat­forms, opti­mis­ing the cus­tomer expe­ri­ence at scale. None of this is easy – it requires a thor­ough over­haul of process, oper­a­tions and cul­ture but a tri­al project can demon­strate the poten­tial returns and build con­fi­dence to push for­wards. Stand­ing still just isn’t an option any­more.