Digital is reshaping insurance sector but only in pockets and this gives CIOs an opportunity to focus on enhancing customer experience through technological advancement
With increasing smartphone penetration and internet access, insurance companies – which have historically been a laggard – are adapting to the modern customer needs by adopting new technological changes. But recent research report by PwC shows that customers still rely on face-to-face interactions for better understanding of their insurance product’s features and pricing. Also insurance adoption through apps is yet to pick steam in the country, unlike banking or retail where smartphone revolution is already underway in a big way.
According to the PwC-CII report, while this is a clear indication that insurance sector in India is yet to reach its digital maturity, the good news is, with technological advancement, CIOs can use this existing challenge to focus on enhancing customer experience and create more digital-savvy insurance customers.
Identifying the digital gap
The research shows that at present, 55% of the respondents mentioned that they continue to prefer buying insurance from agents and brokers. Moreover, the conversion rate from online modes stands at a mere 4%.
The digital revolution however is happening in certain pockets. For instance, the study shows that 39% of Indian customers prefer digital modes of communication on their existing policy. Despite the continued preference for agents and brokers, the findings do reveal that emerging technology (such as chatbots) has already started picking up as the customer’s first point of contact.
At the same time, 67% of customers prefer to leverage aggregators/online platforms which enable them to make calculated and informed decisions by comparing products. As Joydeep K Roy, Partner & Leader, Insurance & Allied Businesses, PwC India, states, “New technology gives rise to new capabilities and processes should be redesigned accordingly to reduce wastage and delight customers.”
He believes that insurance CIOs are well positioned to help business leaders find opportunity amidst industry dynamics and offer better digital experience to their customers.
The challenge of human-centric processes
However, the industry continues to face unique challenges with more customers relying on human-centric processes at various stages of the insurance life-cycle. For example, in the purchase stage, 57% of respondents said that there was a lack of understanding with respect to policy terms and features while purchasing an insurance policy. Policy terms are complex and lengthy, which makes them difficult to comprehend. Additionally, 23% of respondents also felt that there was a challenge with customer engagement where irrelevant products were pushed to customers and there was an overall lack of trust.
Again, at the service and claim stages, out of all the challenges faced by customers, 47% are relationship-related issues as interactions and processes are not easy to deal with. Also, paperwork makes the process lengthy and complex. Further, 35% of the challenges are related to responsiveness during claim processing.
Finally, at the closure stage, customers deal with multiple representatives and have to explain the reasons for their action each time. This is a major inconvenience for customers. Approximately 45% of the challenges are of this type at the policy closure stage. Issues related to inadequately defined processes for closure come next, with customers finding processes lengthy and cumbersome due to the involvement of manual paperwork. Approximately 18% of the issues are related to lack of transparency in charges imposed during closure.
Bridging the gap with technology
PwC researchers believe all these challenges can be bridged by leveraging emerging technologies. CIOs can capitalize on the latest technology trends to drive business in the future.
Abhijit Majumdar, Partner and Technology Strategy Leader, PwC India, in a recent discussion, states that the modern insurance customer prefers simple, customized and intuitive policies, an easy process and a simple and tangible cost breakup. He believes while CIOs and technology leaders in the insurance sector have begun to appreciate this preference and have put the customer at the center of product design, there’s a long way to go.”
The sector continues to rely on people rather than technology and is compelled to go through a digital journey. “This shift in product design from product to human-centric design is a fundamental shift in the Indian insurance industry.”
“Two of the biggest challenges that the industry is facing today are a higher cost of acquisition (due to factors, such as high cost of distribution models and marketing cost) and mis-selling (due to lack of understanding, low awareness), which lead to people not fully understanding the product features and buying insurance just as a short-term investment” Anuj Mathur, MD and CEO, Canara HSBC OBC Life Insurance Co states.
He explains adding that the industry will have to work jointly to ensure that awareness about life insurance solutions reaches across all segments of the population through consistent and regular communication with customers.”
The PwC report focuses on five areas of technology enhancement to enhance customer experience:
1. Robust architecture framework: For a dynamic environment, a flexible and robust architecture is required. Integration with the components of the growing ecosystem and the capability to incorporate regulatory/business changes will be the key to stay ahead of competition, it says.
2. Advanced collaboration tools: Customer executives need to be equipped with these tools to communicate easily and effectively within the organization. Usually, such tools include video, voice and chat facilities along with document sharing.
3. Unified platform: To deliver service on a real-time basis, executives must have multi-system information available to them on a single platform. Creation of such a unified platform includes integration of various data systems and creation of data presentation models.
4. Omni-channel experience: While insurers are focusing on multiple channels and platforms to engage customers and prospects, it becomes important to ensure that the quality across channels and platforms is maintained at the optimum level.
5. Insight-driven persona building: Analytics tools can be leveraged to drive insights from customer history and behavior. These tools may integrate data from internal and external systems. Further, predictive analysis may help executives to identify customers who are likely to default on payment or terminate the policy.
“Digital enablement is a journey; and while a few elements to build operational efficiency are already underway, such as, paperless transactions, the leapfrog impact for insurance businesses would be felt once internal approaches and processes are realigned to deliver simpler, more effective and targeted solutions,” says Kolla Suresh, Head - IT and OPS, Religare Health Insurance Co.
Challenges abound in tech adoption
Despite some of these technology progresses, the report observes CIOs in the insurance industry are facing a number of the challenges in adopting new technologies.
1. Burden of legacy ecosystem: The burden of a legacy partner ecosystem is limiting progress. For example, researchers show a lack of an electronic health record repository across the country makes the risk assessment process challenging. Currently, insurers collect customer health data at a particular point in time through medical tests or self-disclosure by customer which makes the risk assessment process inefficient.
2. Return on investment: Setting up of infrastructure for emerging technology includes additional cost factors like specialized equipment, a connected ecosystem of sensors/equipment, data digitization, analytics/AI/IoT software, and skilled manpower for running operations and security compliances. Considering the elevated cost of emerging technology, demonstrating return on investment over a period of time will be difficult for insurers.
3. Consumer adoption: Although digital adoption is on the rise in India, but the study observes adoption of insurance-related technology will be a challenge. This may be attributed to the higher cost of fitness monitoring devices, home monitoring devices, telematics, etc. Moreover, building consumer trust in IoT will take time. Even simple things may take longer in insurance. As Ashish Mittal, Head of Digital Technology, Apollo Munich Health Insurance Co, mentions, “Social media is still not being used to its full potential and is primarily working just as a grievance redressal mechanism instead of a platform or source for getting more leads. On the initial construct of connecting people together, it has the potential to connect insurance availability with needs and create value for business.”
4. Data privacy and security: Increasing regulations related to customer personal data around the globe and in India will continue to pose additional challenges. The Insurance Regulatory Authority of India (IRDAI) has taken steps to make sure that insurers follow prudent practices in managing risks and protecting customer data. Gangadhar S J, Head - Technology at Digit Insurance, observes that recent data breaches in insurance companies demonstrate cyber security is one of the biggest concerns and area of focus for insurance CIOs.
“It is not only a legal and regulatory risk, but the risk of data breaches must be managed to retain customers, maintain profitability and protect executive careers, he says.
5. Interoperability: The need for reliable platforms and robust procedures will increase in tandem with the adoption of emerging technologies. “Technology providers, insurers and regulators will have to devise and agree on various standards like data standards, hardware standards, security standards, installation practices, power management and protection standards, upgrades and fault diagnostics for interoperability,” says Majumdar.
This journey is not only about technology but also about handling internal disruption and managing challenges like workforce complexity arising from the inclusion of robots and dynamic interactions across the insurance value chain. As Roy adds, “Merely adopting technology and automating processes will not eliminate inefficiencies. A change in approach is needed whereby technology is viewed as a fundamental business tool rather than an operational and process tool.”
“The natural inhibition in a regulated industry can be dispensed with if organizations work with all stakeholders, including regulators and the Government. In this context, the healthy interest regulators are showing in sandboxes bodes well for the industry,” he concludes.