The changing attitude towards eCommerce
Whilst digital natives and online shopping enthusiasts have long been open to the idea of conducting business online, many others have strongly resisted the idea of eCommerce. This attitude shifted considerably during COVID, and consumers had to change to online purchasing. The NZ post eCommerce spotlight report showed a 52% growth in online spending last year compared to pre-COVID levels, reflecting this rapid transition in spending habits.
With these statistics at hand, it is not hard to see that the digital landscape is the future of selling and servicing life insurance. But how do insurers manage this transition?
The challenge of converting to online life insurance sales
The major roadblock many insurers have held onto for years is that consumers don't want to buy life insurance online and trust doing business with a person (a broker or bank advisor) more than dealing directly with insurers. This is despite Consumer NZ reporting that doing business through an advisor, or broker, leads to worse outcomes for the customer, especially with life insurance.
Whilst this business model has been in place and successful for many years, the landscape is changing, and insurance companies must change with it. Consumers demand a transparent, simplified and increasingly digital way of buying insurance.
To move into this digital space, life insurers need to do two things, They need to earn the trust of their customers, and they need to invest in digital transformation.
Life insurers must earn consumer's trust
The first point is relatively easy to understand, purchasing life insurance requires trust. Customers literally have to trust their insurers to do the right thing with their life.
But how do insurers do this?
Insurers need to be open about their policies, and the wording needs to be understandable, the benefits clear, and the exclusions reasonable and well considered.
The claims process also needs to be transparent. Customers' main complaint about insurance is that claims are unfairly declined. Often, this arises as consumers do not fully understand their policies or are unaware of exclusions until they claim, making them feel deceived, even if the customer purchased insurance through a broker.
Customers find it hard to compare policies, or pricing, as they do not understand their coverage. This needs to change for customers to feel they are getting the right coverage at a competitive price.
Investing in Digital Transformation
The second part of the puzzle is the need to invest in digital transformation, which is more complex.
The first issue insurers face is legacy software used to manage closed book policies. Many New Zealand insurers know that this is an issue that prevents them from undertaking a digital transformation. As such, they are investigating, instigating or implementing a change in software by moving to a platform such as AMS Insurance Management that allows them to do away with legacy software and move forward with their digital strategies.
The insurers then need to become agile and technologically advanced, developing apps and web-based products that allow their customers to view, purchase and claim in the digital space. Security needs to be exceptional; all the products must fully integrate with the policy software. Staff need to be educated in using and promoting the digital way of doing business, able to educate and empower customers in their digital journeys.
This training and IT development comes at a cost, so why would insurers do this?
The benefit of digital life insurance
Despite high upfront costs, the ongoing cost of doing business in a digital space is much lower than traditional, broker-based models. For example, an automated claims process can reduce the cost of a claims journey by up to 30%.
The focus on the customer experience and the trust gained through time will result in higher retention of new customers and a higher profit base.
Finally, removing the third party from the insurance transaction, and empowering customers to make their own decisions, removes a massive overhead for new policies, with brokerage fees often exceeding the first year's policy premiums.
If insurers choose not to enter into and compete in the digital space, there is a genuine possibility that they will be left behind in the competition for new business. Even delaying their digital transformation can severely impact an insurer's competitive advantage and ability to 'catch up' to their competition. A recent Price Waterhouse Cooper survey shows that 41% of consumers would switch insurance providers in favour of more digitized alternatives.
If you want to take advantage of the changing digital landscape and stay ahead of your competition in your digital transformation, you need an IT system that delivers results.
It needs to be an end-to-end solution with the highest security and the ability to manage all of your current and future policies yet to be put in place.
We offer that system.
Contact us today and see how we can enable you to build the foundation of your digital transformation with AMS Insurance Policy Management.