Digital Transformation as a lever of high performance in the insurance industry


Interview with Baudouin Thomas

Managing Director at Accenture, leading the Financial Services practice in Belgium & Luxembourg

September 2014


Stéphane Darimont (SD) [Banking Boulevard]:Recent Accenture surveys indicate that the insurance industry expects the volume of new business generated via digital channels to increase substantially in coming years, both in Life and P&C (Property & Casualty) insurance. However, these surveys also suggest that insurers will need to overcome many challenges to make digital transformation a success and achieve Premier League status.

Baudouin Thomas (BT) [Accenture]:

It’s true that the digital revolution is radically changing the insurance industry, not least because of changing consumer behavior due to the increased use of mobile technologies and social media.

The new digital generation, or Generation D (which spans Baby Boomers, Generation Y and Millennials) is permanently connected. This group wants to interact with service providers via multiple channels, and it wants a consistent, personalized experience across all of them. In our new digital world, customer loyalty is fluid and insurers have to be able to provide a tailored experience to retain customers.

Accenture analysis shows that new competitors are entering the marketplace bringing disruptive business models. According to our surveys, 67% of consumers would now consider buying services from organizations other than traditional insurance companies, such as online Service Providers like Google or Amazon…, etc.

Therefore, the status quo is unsustainable and insurers are confronted with a critical dilemma: either become a utility, which goes hand in hand with lower profit margins, or reinvent their business models and adopt a more digitalized/customer-centric distribution approach. The latter comes with a set of challenges.

(SD): In addition to the growth of mobile technologies, social media, and new competitors, what other disruptors are expected to impact insurance distribution in the next three years?

(BT):

Regulatory changes are adding more pressure. Whereas some regulatory initiatives are designed to promote competition between companies—such as regulations to facilitate contract termination—others impose greater clarity with regard to the commissions of insurance intermediaries.

Then, there is a new capital-adequacy regime named Solvency II, which mobilizes huge resources for the development of a new risk-adjusted performance framework by insurers. Investments made in this arena (improved risk modeling for instance) will impact the distribution of products insofar as they will, among others, offer insurers greater agility in pricing their services per customer segment.

So insurers are facing a significant risk. But this is also an immense opportunity to beat the competition, namely those who do not adapt their business model to the new market reality, or those who do not invest on time or sufficiently.

(SD): What are the core parameters of customer experience that should be taken into account when preparing a digital transformation plan?

BT:

The new business model must be articulated on the basis of five core customer motivations that Accenture summarizes as follows:

1) “Know me”: According to our analysis, four out of five customers would be willing to provide personal information to their insurers in return for certain benefits (for example, the optimization of insurance coverage and insurance premium, or access to more personalized products). Furthermore, 40% of insurance customers are willing to pay more for personalized advice or assistance when purchasing insurance. So personalization clearly emerges as a key driver in retaining existing customers and attracting new ones. As a consequence, one of the key steps insurers need to take is using analytics effectively (including information mined from social media and other channels) to leverage big data and gain insights into their customers.

2) “Show me you know me”: Whereas cloud-based customer relationship management solutions can help insurers develop a single view of the customer across channels and lines of business, social media offers an opportunity to listen and learn more about customers: what they think, what matters to them, and how they act. Social media also provides a forum for interacting and engaging with customers in ways that are meaningful to them.

3) “Delight me”: The key point here is that the customer of today and tomorrow expects their experience to be consistent across all channels. Our cross-industry research reveals that significant percentages of consumers become frustrated when companies repeatedly market the same things or ask the same questions, or when they are presented with inconsistent offers on different channels. So insurers must not think just in terms of multiple channels but also of transforming the underlying digital platforms needed to provide seamless experiences across all current and future channels.

4) “Enable me”: While Internet access using personal computers or laptops was the first step in enabling customers to use digital channels, the real game changer has been the growth in mobile. The move to mobile opens new opportunities for collaboration: between customers and agents, between customers and the insurance firm and the various members of its ecosystem, such as the claims assessors and procurement partners. The mobile channel pre-eminently offers insurers the opportunity to take customer relevance to the next level by tailoring offers and interactions to the physical context. Location-based interaction can be highly relevant in insurance. For example, consider injury insurance offered on a ski slope or a claim submitted from an accident scene with supporting photographs. So insurers must be equipped to interact appropriately via mobile, especially given customer expectation of immediacy.

5) “Value me”: Social media (Facebook, Twitter, blogs and consumer review sites) has fundamentally changed the way people interact with each other and service providers before making a purchase decision. Smart insurers will use the information they glean from social media to create and refine personalized experiences that customers want. They will also empower their agents to make the most of social networks – to “be where their customers are” and to increase their productivity. Insurers must pass on customer insights to their agents, equip them with tools such as microsites, and train them to use social media to source, nurture and manage sales leads.

(SD): We obviously cannot cover all the details of a transformation plan in this interview. That said, could you list some of the key points that should be borne in mind when planning a C-level discussion on a digital transformation plan?

BT:

When developing their digital strategy, insurers need to be aware of the difference between true digital transformation and the mere digitization of existing business processes. The latter may be a first step in certain cases, and may generate marginal improvements in efficiency, but in the end it falls short and simply makes the operating model more complex.

Only the companies that transform their technologies as well as their underlying business models will be equipped to deliver experiences that customers want and these companies will be rewarded by customer loyalty.

Specifically, insurance companies with an operating model that can handle a simple front-end and complex back-end will be the ultimate winners. In other words, the key to high performance for the insurer of the future will be to package and deliver complexity in a way that customers find easy to understand and use, yet does not downplay the complex nature of the solution. By building their brands and gaining acceptance as trusted advisors, insurers will maintain their differentiation against a tide of commoditization.

Most insurance products are – and will remain – inherently complex. By offering a complex product in a retailized environment, insurers are creating a tension that has the potential to rip apart their underlying business models. Understanding and mastering this tension between complexity and simplicity will be the ultimate protection against new entrants in the insurance market.

(SD): How does Accenture help its clients to engage in a successful digital transformation journey? Can you give us some examples of recent projects?

BT:

When it comes to digital transformation, there is no one size fits all. Insurers must take a long-term strategic view that assesses the customer landscape and the role the company wishes to play. This role will determine the type of customer experience they want to deliver, incorporating the five elements of the customer experience outlined above. Having done this, the insurer will have to develop a detailed plan for achieving this goal.

Our firm is permanently helping several large institutions around the world to design and implement their digital transformation plan, and just recently we acquired Fjord, a key digital player globally with deep expertise in customer experience.

One of the first areas of expertise clients approach Accenture for is the development of customer data analytics (or 360° analytics). This requires a combination of advanced industry as well as technological skills. Accenture’s state-of-art methodologies in this domain provide clients with precious insights as to their customers’ buying and churn patterns. We also help them define new strategies and engage in win-win programs with intermediaries.

In terms of larger engagements, an excellent example is a major insurance company that recently engaged Accenture to help it define a new multi-channel strategy combined with the implementation of a three-year IT implementation plan to:

- Improve cross-selling and customer retention,
- Reinforce the company’s positioning on the mass-affluent and high-net-worth market segment and,
- Improve operational effectiveness.

Another example is a project at a life insurance company that commissioned Accenture to design and implement a new integrated technology for the distribution of life insurance, retirement and personal insurance services. We designed a set of iPad applications for 3,000 itinerant sales professionals who are now able to perform end-to-end sales from a single device in a short time frame.

(SD): Finally, what type of professional profiles are you currently recruiting for your Accenture Financial Services team?

BT:

We welcome smart, results-focused people who share the same drive to bring new ideas and deliver excellence to our clients while working seamlessly together.

Contact Accenture Belgium : Baudouin Thomas, Managing Director at Accenture, leading the Financial Services practice in Belgium & Luxembourg Tel: +32 (0)2 226.71.18 baudouin.thomas@accenture.com