Sigma: How Digitalization Will Transform Insurance Relationships

In its latest sigma, Swiss Re said digital transformation empowers consumers to be more informed and independent than ever before and equips insurers with the tools to cater to customers' current and future needs. This leads to the development of new data-driven business models, impacting the entire insurance value chain.

Swiss Re said that while consumer-supplier touchpoints will become predominantly digital, human interaction will continue to play a role: through consumer feedback and analysis, insurers will be able to identify where in-person engagement is most effective. To date, insurers in emerging markets lead the way in optimizing the potential offered by digitalization, as in many of these markets, the starting point is digital rather than analog, according to Swiss Re.

The availability of internet-enabled devices and universal connectivity has changed consumer behaviors and expectations, particularly among younger generations. Empowered with digitally facilitated information, consumers expect rapid access to information, transparency, and more personalized purchase experiences relevant to their lifestyles.

"As a result of digitalization, insurers now have direct connection to their customers," said Jeffrey Bohn, chief research and innovation officer at Swiss Re Institute. "With the availability of granular data, insurers can better segment customers enabling them to develop new tailored products and services and refine existing ones in real time. This benefits customers and insurers alike."

Mixing Digital and Targeted Human Touch

With the growing granularity of insights into customer behaviors, the role of insurance is evolving from indemnification of losses to a broader consultative service on risk prevention and mitigation covering both private and commercial clients' changing needs over time. For example, digital data sources signal changes in an individual's life circumstances such as marriage, a new home, or a new job. In response, insurers can direct personalized guidance to the client on predictive and prescriptive next-step risk mitigation actions.

The direct relationship with customers will evolve as new touchpoints and channels become normalized and back-office processes like marketing/sales, underwriting, and claims administration are increasingly automated. To complement the efficiencies of digitalization, insurers will be able to make the most effective use of the insights and target human engagement to circumstances where consumers expect an empathetic response, such as a health crisis or death in the family. The personal touch in sensitive areas will bring a human face to insurance.

New Data-Driven Business Models

More and more, insurers will operate in an environment where they have continuous access to different data sources, including from connected objects and platform providers, and behavioral insights from consumer and environmental data. This will see the evolution of new data-driven business models taking insurers beyond their existing value chain. True leverage will come from partnerships with key data suppliers.

"Innovation will continue to transform the insurance industry," said Thierry Léger, CEO of Swiss Re Life Capital. "Changing risk environments, shifts in customer attitudes, and accelerating advances in technology will be the key drivers of the next few years. We will need to leverage insights from our data and partnerships to upgrade our business practices."

Emerging Markets Lead the Way

To date, insurers in emerging markets lead the way in optimizing the potential of access to different data sources and consumer touchpoints. They are partnering with established digital platforms and ecosystems to combine features typically offered by stand-alone incumbent firms into a one-stop-shop service. Insurers bring underwriting expertise, while platforms and ecosystems offer access to customers through their ability to target specific segments and mine user behavior as well as offer multiple touchpoints to capture user attention.

Regulation will play an important role in supporting the integration of new technology and data into insurance business across different jurisdictions. In monetizing the potential of digitalization, insurers will need to manage local data protection and privacy requirements. Longer-term, successful insurers will be those that can leverage insights from their investments and partnerships in data and analytics, and develop compelling risk protection solutions aligned with evolving regulations.