Disruption has been a talking point in business since the turn of the century. Dire warnings about how failure to transform will consign a business to the waste bin of history came thick and fast.
And it happened. Challengers emerged in many sectors and made whole business models redundant across entertainment, retail, travel and more. However, the financial sector, and especially insurance, has remained insulated from the need to change.
The complexity of regional rules and regulations, the sheer size of long-established banks and insurance companies, the trust that financial brands have built up over years and the wish for a point of human contact combined to keep disruptors at bay.
But this could easily change. Now the perfect storm has arrived for the insurance sector, catalysed by COVID-19. The combination of the increasing use of mobile for research and transaction, the mounting number of hours we all spend online – according to Ofcom, adults are spending on average four hours a day online compared to 3.5 last year - and the desire to complete an end-to-end customer journey online (especially among younger customers) has put pressure on banks and insurers to undertake wholesale digital transformation.
Customers demanding more from insurers
The seamless customer experience consumers have enjoyed elsewhere, from ordering via Ocado to sitting back to watch Netflix, has heightened expectations of what a superlative service should look and feel like. The formality of a face-to-face meeting and the need for physical documents and endless form-filling to set up a life insurance policy simply does not fit these expectations, with 57 per cent of policyholders telling us they prefer to complete the process online.
The pandemic has put points of friction and frustration firmly in the spotlight and created an abrupt rupture that means gradual change and five-year plans are no longer viable. Customers who wanted to check or alter insurance agreements quickly after lockdown were left adrift. People who wanted instant access to advice and a speedier process as their circumstances changed daily discovered it was not so easy to arrange matters remotely, that’s if they could find customer service personnel.
The undeniable “cool” factor of challengers
The pure-play insurance providers have signposted the way ahead. Companies like property insurer Lemonade have devised frictionless experiences with easy-to-use digital tools that help get the task done quickly. Even the language is plain and direct - ‘Lemonade’s coverage protects you and the stuff you own at home.’
Monzo has just launched its premium service which comes with phone and travel insurance. Legacy businesses like Saga, LV= and Post Office already offer such products, but the online challenger will bring innovation, a fanatical focus on customer experience and a certain ‘cool’ factor they can’t match.
If legacy insurers are to remain competitive they need to speed up transformation plans to introduce automation and tools and platforms, optimising the customer experience at scale. None of this is easy – it requires a thorough overhaul of process, operations and culture but a trial project can demonstrate the potential returns and build confidence to push forwards. Standing still just isn’t an option anymore.