Customers’ willingness to purchase insurance from big technological firms is rising fast, the Capgemini and Efma's World Insurance Report 2020 has shown.
This is a clear pointer that today consumers — who demand superior experience in terms of ease of purchase and convenience — are eager to take a chance when non-traditional firms such as digitally agile BigTechs (like Google, Amazon, Facebook, Alibaba) or product manufacturers (like Tesla) offer top notch consumer experience, said the report released on Thursday.
Sample this data point: while only 17 per cent of Capgemini’s World Insurance Report 2016 survey respondents said they would consider purchasing insurance from BigTech, the number has doubled (36 per cent) this year. Clearly, customer behaviour is shifting in favour of BigTech insurance providers as customers feel empowered to forego agents and brokers and work directly with new entrants.
Need to innovate
This should sound alarm bells for incumbent insurers’ as their long standing hold on customer trust can no longer be assumed. Insurers seeking to retain or jump start customer stickiness, loyalty and confidence must shift their experience-led engagement efforts into high gear, the report suggested.
To remain relevant, incumbent insurers must take action by re-evaluating their portfolios and harnessing partnerships to become ‘Inventive Insurers’. This involves shaping existing products to meet fast evolving customer needs and preferences.
The entry of product manufacturers — such as Tesla, which entered insurance in August 2019 — into insurance may mark a critical juncture for the insurance industry, according to the report.
Product manufacturers have a keen understanding of their products and their customers, details an insurer may not have. Besides, product manufacturers collect real-time customer data using IoT devices or mobile apps.
Leveraging this asymmetric information, product manufacturers could aggressively price insurance offerings and put incumbents at a disadvantage, the report noted.
Millennial mindset
Noting that digital adoption is no longer a function of age but is now mainstream across generations, the report highlighted that the ‘millennial mindset’ has transcended age.
The number of Gen X and older customers making daily online and mobile transactions has doubled, rising from 30 per cent of Gen X (those born before 1980) and older respondents in 2018 to 64 per cent in 2020.
The Covid-19 lockdown will further fuel this trend as consumers are forced to use digital channels for day-to-day transactions irrespective of age or tech know-how
Inventive insurers
The report concludes that in this new landscape, those that succeed will be the ‘inventive insurers’ — incumbents that understand customer needs and preferences and that leverage available ecosystem data to deliver personalised and time-sensitive products.
Anirban Bose, CEO of Capgemini’s Financial Services Strategic Business Unit and Member of the Group Executive Board , said, “The endgame will be to become the insurer that provides hyper-personalized experiences to be able to compete head on with BigTechs. There has to be a reason for consumers to choose to stay with insurers and hyper-personalization can be that reason.”