LONDON, Oct. 22, 2013 /PRNewswire/ -- Insurance companies have high digital ambitions but have failed to take action and embrace the digital world, according to EY's 'Insurance in a digital world: The time is now' survey, launched today. The survey was conducted in July 2013, with participants from more than 100 insurance companies.
Graham Handy, EY's Global Insurance Customer Leader, comments, "Digital is a new market force that is driving a massive change in consumer expectations. Insurers cannot afford to be left on the sidelines of the move to digital. They must evolve and respond to constantly shifting consumer expectations, but currently they are holding themselves back due to internal factors, primarily technology and culture."
While the survey highlights that digital uptake is slow in the insurance industry across the globe, each of the regions has different inhibitors of digital growth. While legacy technology constraints impede the Americas, Europe struggles with slow pace of delivery and Asia-Pacific is more concerned about regulatory restrictions.
Disconnect between ambition and level of investment
Insurance companies globally have short-term ambitions when it comes to digital. Fifty-seven percent, of survey respondents say that they intend to have a regularly updated digital business case and 78% aim to have an organizational structure to support their digital strategy within the next three years.
Currently, however, almost 80% of survey respondents do not see themselves as digital leaders, believing instead that they "only play the digital game" or are "still learning to use digital capabilities for a competitive advantage." More than two-thirds of insurers globally feel that they have delivered some quick, easy wins but that has not been accompanied by a long-term strategy to realize their ambitious digital objectives.
Sixty-eight percent of respondents globally spend less than 10% of their business and IT development budget on digital. A significant number of Asia-Pacific respondents did not know current levels of digital development spend: 79% versus 40% globally. Such lack of clarity is mirrored in their view of expected future spend: 58% anticipate an increase over the next year, compared to 80% globally.
Lack of strategy and legacy systems the biggest barriers
Survey respondents cite the lack of a single cohesive digital strategy business case (47%) and appropriate operating models to deliver digital capabilities (57%) as major challenges. Despite 40% of insurers having support from senior management and a digital sponsor within their C-suite, more than one-third of respondents believe senior management support is "not always backed by actions, budget and resources."
Legacy technology, slow pace of delivery and company culture are also hindering the process. In the Americas, 96% cite legacy technology constraints as a major impediment to growth versus 80% globally. While in Europe, 93% say the slow pace of delivery by insurers versus 64% globally hampers their digital ambitions.
Globally respondents also consistently cite intermediary and agent channel strength or resistance as one of the top three inhibitors in implementing a digital strategy. Nearly 50% of European insurers cite this as an inhibitor to digital growth while only 34% of Asia-Pacific insurers believe this is an issue. However, this reflects the central role that the intermediary plays in the Asia-Pacific region.
With technology changing so rapidly, insurers need new skills to exploit the digital challenge. Analytics capabilities (segmentation, customer data and predictive modeling) emerged as the most in-demand skill-set (75% cited). This was followed closely by technology and marketing capabilities.
Graham comments, "Without appropriate analytics skills and tools in place, the digital business case may never be realized."
Enhancing the customer experience
A startling 89% of insurance companies do not leverage past interactions when recommending products or services to online customers. Just 1% currently offer online rewards, discounts, apps or "live" website assistance, although 27% expect to provide these benefits in the future.
Graham comments, "Insurers are failing to communicate at critical times and are missing opportunities to engage with customers in the life cycle of a policy through the use of digital retention triggers and predictive modeling."
Embracing the mobile and social media wave
Graham comments, "Insurers focus on mobile products and services is limited. But with mobile and tablet use growing exponentially, neglecting mobile is turning one's back on the future."
Insurance companies could also be taking social media more seriously, recognizing its value as a relatively inexpensive marketing tool and a means to engage with and influence skeptical, digitally-savvy younger consumers.
Only 43% of insurers provide mobile quotes compared to 72% who provide these online. Even the non-life market, with simpler, shorter-term products that can be more easily enabled digitally, significantly under-exploits mobile.
Asian insurers are less likely than their global counterparts to use social media and mobile tools to interact with customers and agents: 30% use mobile apps – lower than half the global ratio of 61%. However, they are more likely than their global counterparts to interact with customers at financial stages.
Life races to compete with non-life
The majority of insurers (81%) believe that they could lose competitive advantage if they fail to embrace digital, and 74% feel this may affect their ability to innovate.
The survey shows that the less advanced life sector is currently spending more on its digital strategy to transform than the non-life sector. Seventy-nine percent of non-life companies spend less than 10%, with a further 11% spending in the 10%-20% range. In contrast, 68% of life insurers spend less than 10%, with an additional 28% spending 10%-20%.
However, life insurers seem less concerned (46%) than non-life companies (60%) that "customers will ultimately leave us" or that "partners may shift their business elsewhere" (48% versus 58%, respectively.)
Graham concludes, "Whether insurers can make the ambitious changes they envisage within the next three years remains to be seen. Attaining their goals will require significant – and rapid – improvement to close the current gap. However, customers will demand considerable changes in how their insurance is delivered, and the winners will be those insurers who execute well against their digital ambitions in the coming years."
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