Digital revolution in short-term insurance industry

Technology and the digital revolution will have a massive impact on the short-term industry. (Photo: AFP)

Technology and the digital revolution will have a massive impact on the short-term industry. (Photo: AFP)

With over two billion smartphones in use worldwide, few can deny that going digital has become a business imperative. The short-term insurance industry in South Africa has been one of the slower industries to realise the importance of going digital and is possibly unaware of a possible R115-billion value of gross written premiums by 2020 that they may stand to gain from.

Technology and the digital revolution has in recent years disrupted many industries and thus placed once large companies with large market shares on the back foot and ushered in a new wave of companies that are less than 10 years old, but in the forefront. The prime example is Uber, because Uber does not own the millions of cars that rely on its platform — it’s a technology firm.

A report by Accenture estimates R115.2 billion of gross written premiums can be realised by the short-term insurance industry, by 2020, if they are able to correctly leverage on the advantages that going digital has to offer.

This survey was conducted by interviewing over 1 500 insurance customers (mostly around motor matters) and it revealed their habits concerning their internet usage. The survey revealed that the insurance customers were already adept with the internet, spending and allocating their monies through online channels. These included online usage around banking online, receiving and making payments online and shopping online; 96% of the surveyed said they browsed the internet at least once a week, with 86% of them browsing on their mobile phones.

Any innovative company would understand the need to customise its offerings around the habits of its customers — this is an obvious avenue. However, the next question becomes, how to package this offering and provide a compelling value proposition. Value propositions around insurance was a pertinent part of this survey, as understanding what solutions customers seek from insurance providers would reveal why they would choose one insurance provider over another. The general value propositions around insurance are:

  • Instant insurers respond immediately in the event of an emergency. An example would be roadside assistance in the event of an accident.
  • Ecosystem insurers understand the general commercial habits of their customers and partner with other companies to offer solutions that address insurance needs and general needs, such as providing courier services and discounts from certain retail chains.
  • Holistic insurers attempt to be a one-stop shop for all your insurance needs and manage all your policies through the same means.
  • Social insurers intend to understand their customers’ habits around social media and thus offer products and deals to reflect the needs of the customer.
  • The most popular value proposition has been instant insurance, followed by holistic insurance products, with social insurance products gaining the least popularity. The most important aspect to note is that all these value propositions all have the potential to be delivered digitally.

    Although there was an appetite for the use of digital platforms to deliver short-term insurance, there were five key guidelines that the survey revealed to be pertinent to would-be insurance providers on digital platforms:

    Be accessible

    With instant insurance being the most popular insurance value proposition, it is no surprise that an accessible insurance provider would be most favoured. Telephonic communications remains the current main communication channels and this has been most favourable for the middle-aged to older customers, as it entails a human touch.

    Among the younger market there is an appetite for digital platforms and although insurers do interact via email, there is increased desire for this communication channel for providers who are not using this method. The desire for digital communication through an internet portal or through an app were favoured by 49% and 51% of the surveyed individuals respectively. A big abhorrence was communication using instant messaging and social media.

    Be trusted

    Data mining is one of the more recent career paths that have received attention due to the vast amount of data available to bodies such as insurance providers. In some instances, these companies have been able to sell data on their customers to other companies. Although this phenomenon may be on the rise (depending on the circumstances and information provided), insurance customers frown upon this and insist that their information be safe in the hands of insurance providers. The study has revealed that customers believe retailers and banks to be more trustworthy with their private information and that they need assurance that their data is safe. Customers revealed that they were very uncomfortable with revealing information around their credit card spend data and social network data, but were more likely to allow data around their cars with the licensing department and personal contact information. Less than 40% were comfortable with this in both cases, but others might be willing to be convinced.

    Be responsive

    The insurance industry is highly price sensitive for its customers, and many customers, although generally satisfied with the service levels, would migrate to another provider for the right price and/or benefits. Most insurance customers surveyed had been with their providers for less than three years, with only 17% showing dissatisfaction with their current provider. The top three gripes in terms of service was lack of value for money, lack of tailormade solutions and an inefficient claims service.

    Be relevant

    Responsiveness and relevance are two sides of the same coin, and being able to anticipate customer needs will ensure insurance providers remain relevant in the market. Insurance customers now require customised insurance products and would like value-added products. This also explains the popularity of the ecosystem insurance value proposition. Customers are suggesting that insurers partner with third party providers to remain relevant

    Be smart

    In recent years the internet of things has gained popularity as it allows data collection and tracking of once passive tools that governed productivity and outputs. Telematics is more relevant in insurance as this technology allows insurers to track data such as the driving habits and practices of customers. The South African customers are aware of this technology and understand this technology can link to loyalty points and possible cheaper premiums. They have expressed an interest in this type of tracking to also assist insurers with rapid response and understanding their motor needs.

    In conclusion, the South African insurance customer base is tech-savvy, hungry for innovation, and reimagining how to be offered more flexible and tailormade insurance products that speak to their needs. The short-term insurance industry stands to gain billions in gross written premiums if they embrace the beckoning digital revolution.