Paul Dix

The biggest ‘technology disruptor’ will be the consumer

Insurers should stop focussing on digital engagement with customers and instead focus on developing their role as an important provider of services to and with those organisations that have a daily role in customer lives.

I hear a lot from Insurance executives about the need for the development of a rich digital experience for customers but much of this ambition seems to me to forget the reality that for many, if not the majority, of the population that the interaction with Insurers probably occurs no more than 3 to 4 times a year, and often that will be via an intermediary.

What I hear little about is an ambition amongst insurers to participate in a finance ecosystem where the customer engagement – NOTE not the customer – is owned and delivered by another organisation – take many of the new start up FinTech Banks that have emerged and grown rapidly over the past two to three years, for example N26, Monzo and Starling Bank.

The approach taken by many of these banks is to shift the nature of their relationship from a backward looking transaction reporting paradigm to a proactive forward looking one; one where they use analytics, data enrichment and machine learning to manage everything from customer on-boarding to suggestions about how to improve the way in which a customer manages their finances.

As customers find value from this different forward looking paradigm, as they transact and get feedback in real-time from these new banks, what starts to happen is that they use them more and more and look for opportunities amongst other providers of financial services to do the same.

We should not forget that the biggest ‘technology disruptor’ will be the consumer, technology adoption will increasingly be driven by what is seen as beneficial or otherwise by consumers and regulators working on their behalf. The effect of this is that before long most financial lifestyle transactions are with an intelligent new bank and all of the data that many insurers talk about as being the next technology opportunity to further develop their risk modelling is unavailable to them.

There are other examples of this new paradigm being developed in the UK and Europe as a result of PSD2 and the Open Banking Initiative, for example Amazon Paypal and so on.

The great shame for Insurers is that in reality the Insurance distribution model in the UK has been operating in this way for many years, but in a disjointed and retrospective fashion – much as with the incumbent banks.

Insurers have operated at an arm’s length from their customers via Brokers or Price Comparison Websites for many years and have only in the last two to three years started to engage in a real time process with the intermediaries’ customer through initiatives such as Insurer Hosted Pricing. The problem is that these self-same intermediary organisations may suffer from the same paradigm shift where they also become a ‘service’ that the new banks will use to satisfy the customer forward looking expectation – imagine the new bank using a PCW to find the best quote for example.

So, if this is the new reality, what do insurers should do? I think they should start to model their future distribution model on the basis that they will be part of a financial services ecosystem, co-ordinated and owned as a customer experience by others, and to develop their future as digital insurer as a ‘service provider’. Incumbent banks are beginning to think this way and with technologies such as CGI’s Open Finance and Insurer Hosted Pricing Platforms the means to get there is readily available.

Please leave a comment and let me know what you think.

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