Insurance market going digital
Insurance companies face many challenges every day, but nowadays it seems that the adoption of digital technology might be the biggest challenge yet. The digital revolution has the potential to completely transform market conditions in different sectors of the economy faster than any other development in the history of business
Both the authorities and the market players believe that the Romanian insurance market should be ready for new regulations in the digital area if it hopes to improve relations with the consumers.
he adoption of digital technologies can provide new opportunities for additional insurance premium volume and an improved customer experience. For that to happen insurers need to invest in digital strategies and actions, and must adjust their strategies to remain competitive. Nevertheless, a lot of education is still needed in the insurance sector.
Deloitte Central Europe Top 500 ranking and report for 2016 shows that organizations are considering how best to fine-tune their operations and business models to the new reality to maximise profits, protect their market share, and stay competitive.
Over two-thirds (73 per cent) of business organizations operating in Central Europe have already developed their digital strategies and 61 per cent know how they will go about implementing them. Based on a Deloitte study, 18 per cent of companies are still developing their approach to transformation and quantifying their business objectives for the years to come.
Bogdan Andriescu, UNSICAR: "The local insurance market should be ready for new regulations in the digital area if we want to improve relations with the consumers"
Although IT innovation was not a priority for the local insurance market, now we face a digital transformation based on three driving forces, according to Bogdan Andriescu, president, UNSICAR (Romanian National Union of Insurance and Reinsurance Companies).
"First, there′s the millennials generation, who has a completely different perspective regarding mobile devices and the interaction with companies that offer various services," he adds. "The second driving force is that the adoption of digital technologies mean new opportunities for additional insurance premium volume and an improved customer experience. Finally, digital innovation will lead to more regulations that will put pressure on companies for an efficient implementation."
The president of UNSICAR believes that the local insurance market should be ready for new regulations in the digital arena if they want to improve relations with its consumers. "Unfortunately, in the last couple of years we were forced to turn our efforts to cope with regulatory requirements that had nothing to do with digitalisation and that will have a negative impact on how the consumers perceive the local insurance market," he continues.
Andriescu believes that all Romanian industries have poor strategies and are not fully defined to face the huge amount of information that comes through mobile devices connected to the Internet. "We cannot compare ourselves with other European countries when it comes to online shopping with a smartphone, tablet, laptop or PC."
Given the current development stage of the Romanian insurance market there is no surprise that the consumers choose to interact with a broker or an insurance agent rather than buying insurance products online, according to UNSICAR′s president.
"We need to create digital platforms that interact and exchange information between insurer, broker and consumer," says Andriescu. "These platforms already exist, but they need to be upgraded according to consumptions trends and clients′ behaviour. The success of each company, in any field, is largely dependent on customer relationship management, which is one of the most effective ways of building and maintaining the relationship with clients."
As the digital age continues to evolve and we witness more progress in technology, strategies focused on clients should consider their desire for digital techniques to keep them satisfied in the long term, according to the same source.
"The insurance industry is changing, not only gradually but fundamentally," adds Andriescu. "Meanwhile, the digital revolution is transforming the way we interact with our customers and it has an impact on the entire value chain."
Aurelia Costache, EY Romania: "Insurers must invest solid effort in digital strategies and actions, and must adjust their business models and strategies to remain competitive"
"While digital leadership ambitions are high in insurance businesses, many have not reached digital maturity," says Aurelia Costache, financial services advisory leader EY Romania. In her opinion, insurers are less advanced because of organizational silos, multiple distribution channels and legacy technology that impacts the speed at which new strategies are adopted. "Yet, customers expect the same intuitive and streamlined experience from their insurance carriers as they do from their favourite app, search engine or online retailer. Therefore, our view is that insurers must invest solid effort in digital strategies and actions, and must adjust their business models and strategies to remain competitive. Failing to adapt to the fast pace of digital change presents many risks, including losing ground to more agile players."
Costache believes that Romania needs to be ready to adopt new regulations to be prepared to face the digitalization challenge. "We acknowledge that the country is aligned with the European legal framework, through applicable EU Regulations and the directives which have been transposed into national legislation."
Historically, the insurance industry has been reluctant to embrace transformational change, even when faced with significant external threats, according to EY′s representative. "Some of the barriers are cultural and organizational, while others are technological or operational. But the calls for transformative change in the industry - which come from both forward-looking executives, as well as analysts - have grown more intense, with data-driven disruption looming on the immediate-term horizon."
Although the potential is significant, Costache said that insurers are struggling to operationalize the available big data. "There have been initiatives in the industry to pilot the leverage upon digital information available. Yes, pilots make sense, but small-scale ′science projects′ must give way to big commitments, significant investments and cultural change."
In her opinion, traditional enterprise IT investment has focused on improving and automating internal operations. "While that imperative still holds, the environment has radically transformed with the reach of the internet, rise of cloud computing and social collaboration channels, coupled with increasingly powerful personal devices. Everyone now wants to be connected and responsive. Real-time interactions and rapid agility in dealings with customers, partners and employees are the real differentiators."
According to Costache, if insurers do not adopt this thinking and approach, they will find it impossible to meet the expectations of the demanding customer who has a growing array of new options to buy insurance from new, digitally savvy competitors. "Those insurers that cannot rise to this challenge risk losing market share to more nimble players. It is a now-or-never scenario. Insurers cannot afford to be complacent regarding digital. The first step is to create a comprehensive digital enabling strategy and to provide flexible product offerings that meet customer demands and expectations, the ultimate goal being to enhance customer centricity with the help of digital enablers, allowing insurers to provide their clients with individually customized services at reasonably low costs."
Cosmin Costea, Deloitte Digital: "We need a lot of education in this business and guidelines for insurers"
Insurers in Romania are very interested in the digital age, in how to sell their products online and how to have integrated communication, but they don′t always know how to get ahead of their game, according to Cosmin Costea, strategy director for Central Europe, Deloitte Digital.
"They want to but they don′t know where to start. Precisely for this reason, we have decided to develop some roadmaps or guidelines for the insurers. Very often in your business you must first take care of the things that can be solved very fast without a great financial effort and without involving many organizational resources."
In his opinion, the advantage here is that insurance companies can earn some easy money without large investments. "Their board, their shareholders can get positive results in the short term," added Costea. "For example, with a reasonable amount of money an insurer can start with a platform that gathers all customer data from all possible sources, just like a database. After that they can start campaigning on digital channels. Insurers are aware that they lose money through non-targeted advertising, but are still working to come up with ideas and solutions on how to manage the digital age."
According to Costea, we need a lot of education in this business and some "guidelines for insurers." Deloitte Digital is currently developing a project in this regard and they want to reach out to the insurers and help them solve specific problems they might have.
According to data from Deloitte, digital transformation is an increasingly important feature of the business plans prepared by enterprises wishing to gain a competitive advantage over their rivals.
"It can hardly be disputed that digitalizations will have a significant impact on business activities during the next few years, lifting barriers and changing operational models and ways of interacting with clients and customers," says Zbigniew Szczerbetka, consulting leader, Deloitte Central Europe.
Close to one in ten (nine per cent) of the entities in the Deloitte survey, who agreed to provide their input, have to date spent ten million Euro or more on digital transformation related projects.
Cristian Ionescu, Allianz-Tiriac: "not only the products will change, but also the traditional way of selling products and customer interaction might change"
In the next five to ten years, we foresee a big change in the insurance industry, affecting all business lines due to the new technologies developed and adoption of tools that will influence the way we address and asses the risks, according to Cristian Ionescu, deputy general director, Allianz-Tiriac.
In his opinion, not only the products will change, but also the traditional way of selling products and customer interaction might change.
"This change already started as customers may buy simple insurance through a web portal or an application. For example, Allianz-Tiriac offers to its clients the possibility to buy and pay the travel insurance on their way to the airport. It is more likely that the focus will be shifted from risk coverage only to a combination between risk coverage and assistance service and this will be the primary base for upcoming products and commercial opportunities."
Ionescu says that the insurers need to adopt their product range and after-sales services to the new realities and needs that appeared in the lifestyles of our customers.
"The authorities are more open than in the past in accepting digital technology, even the classical archives will be replaced with an electronic one," he adds.
"Internet provides a great deal of information but it is a big challenge to extract and observe the relevant parts which will improve our activity and clients′ experience. All that information will be gathered, clustered and mixed with big data to identify different patterns that will enable us to evaluate the customer behaviour and calculate the correct tariffs."
Using the information that will be at their disposal, the insurers will do a better risk selection which will result in smaller tariffs per insurance (lower average premium), better quality services and less time for the clients spent in dealing with the insurer, according to Allianz-Tiriac′s representative.
"Digitalization and customer-centricity are two of our main strategic objectives, locally and worldwide, two of our principal pillars that will help us to develop the business and to prepare our company for the future."
Ionescu also says that digitalization will not change the insurance industry overnight. "Digital instruments are the only tools that can be used to create and address new market segments, to improve activity and quickly respond to customers′ needs and to improve your internal processes as a base for operational excellence that could bring savings," he concludes.
Marius Popescu, NN Romania: "Digital age allows insurers to harness the power of advanced technologies to redesign their business models around the customers"
For the next few years, digitalization is one of the most important trends in the insurance industry too, despite the challenges insurers face in moving their business to the digital era, says Marius Popescu, CEO, NN Romania.
"The millennial generation has been a powerful force for this change. This generation has been driving insurance companies to adopt highly customer-centric and digital technologies that better fit the era it grew up in. In the face of the new digital era, insurers are reassessing their business models and are making digitalization a key priority for the future. Moreover, digitalization and technological innovation existing in other industries also accelerate innovation in the insurance industry, both in terms of technologies used and services offered."
In his opinion, digitization is rewriting the rules within the business models based on customer experience. "That is why companies in general and insurers in particular align their business strategies to the digital revolution and seek to integrate innovative digital technologies within their business processes. Today, customers expect to buy what they want, when and where they want and at the most convenient price in just a few steps using technology."
Popescu is confident that the Romanian legal framework will be aligned to the European legislation in the upcoming years. "And the context in Romania is favourable, as we have a highly developed IT industry and some of the best tech specialists in the region. There are also examples of best practices for digitalization including from a legislative perspective, with the banking industry being just one example."
Digitalization itself represents a disruption in the insurance industry, according to NN′s CEO, who believes that "the transformation is huge", as the digital age allows insurers to harness the power of advanced technologies to redesign their business models around the customers and take advantage of every opportunity offered by a more fluid marketplace.
"Companies are creating unique customer experiences through new combinations of data, business resources and digital technologies. Their approach is more and more customer-centric, while the innovative strategies, technologies, processes and experiences allow insurers to develop and create new revenue streams," he adds.
According to Popescu, digital data offers enormous potential for the insurers.
"The intelligent handling of this flood of data can generate significant added value along the entire value chain by enabling insurers to design more relevant customer value propositions and services that are truly based on the customers′ needs. NN is constantly investing in solutions and technologies that allow us to manage the increasing flow of data and to explore new ways it can develop our business."
In Romania, NN is in the process of developing the necessary infrastructure to collect and manage data in real time.
Popescu explains that the company is building a complex and comprehensive data warehouse and preparing to use tools for machine learning. "We are investing in building digital technology skills within our teams. We are testing devices and exploring options to seamlessly integrate Internet of Things and other innovative digital technologies in our operational processes."
Emilia Bunea, CEO, Metropolitan Life: "Although digitization brings obvious benefits, there is no machine that could compensate for human interaction within this industry"
Digitization is the process that impacts all areas nowadays, sometimes even in the form of digital disruption, according to Emilia Bunea, CEO, Metropolitan Life.
"It is part of our everyday lives and comes bundled with several advantages," she added. "If I had to choose one word to describe the process of digitization, it is speed. Today, the speed of action and reaction is faster thanks to the development of electronic infrastructure, enabling the circulation of information over a long distance in a very short time."
Moreover, Bunea says that with the technical advances we can now use technology in storing and processing information in a more efficient manner.
"For example, the young generation is characterized by the preference of obtaining quick results, easily and with simple procedures. The digital environment is the place where we can communicate with this segment and where we use a common language. It is one of our priorities to be up to date with the latest digital trends and focus our efforts to put them into practice, to constantly evolve alongside our customers. We have made sustained efforts in this direction, both in the sales process and our consultants′ professional development by introducing new online training modules."
In her opinion, mobile telephony has become the most-used means of communication in Romania, within less than ten years. "If in the early ′90s cell phones were true ′bricks′, allowing us just to talk or to compose messages, today′s smartphones represent an indispensable tool in our lives, as we use apps for electronic versions of our cards, to pay bills, to check the weather or the traffic, for socializing, news, music, organizing and synchronizing our contacts from our phones with other devices. Some may call it a general addiction, nevertheless mobile devices allow us to have more flexibility and always be up to date with everything happening around us - in short, achieving more."
Bunea also says that the technological development helps their consultants to be better informed and communicate more easily with customers, to discern their profiles and to relate more effectively to their needs.
"Externally, our strategy in digitalization aims to streamline the online platforms and provide relevant and accessible content to our customers, adapted to their daily life speed. We will continue the process of digitization in our business and an important action already underway in this area is the development of the eCustomer platform, available for all of our clients."
Although digitization brings obvious benefits, Metropolitan Life′s CEO concludes that there is no machine that could compensate for the human interaction within this industry. "The consultants are those who can analyse complex customer needs and respond to them with relevant offerings. They are the ones who listen to people or talk to them about their protection and their families′ protection."