Digital insurance is a new ‘player’ that takes advantage of digitalisation and new technologies to attract customers quickly through fully customised policies. Traditional insurers are thus faced with the challenge of perfecting their coverage and joining the digital transformation in insurance industry.
Digital transformation in insurance industry
Over the next five years, the global insurance industry is expected to grow by 250,000 million euros. Despite this growth, the entry onto the playing field of new players, digital insurance or insurtech, could put traditional insurers in check.
During 2020, up to 87 new initiatives have been incorporated into the insurance map in Spain, totalling 247 players and seven corporate initiatives. The entry of new players could mean a loss of 4,000 million in revenue for traditional insurers from policies that will migrate to digital insurance, according to calculations by the consulting firm Accenture.
“The rise of digital channels threatens the renewal of some traditional premiums and changes the future revenue landscape for insurers,” Alex Borrell, head of Accenture’s insurance industry in Spain, told El País newspaper. “The industry will continue to grow and be resilient, however, the pace of technological and social change is very fast.”
Only one possible way
The industry worldwide, therefore, seems to have taken a direction in favour of digital insurance due to the interest, quality and timeliness of the solutions they present and their fit with the insurance and care world. However, this shift towards the insurtech model already implemented in the United Kingdom, characterised by digitalisation, artificial intelligence, agility and speed in customer acquisition, also has some shortcomings. Digital insurance, mostly startups, does not have the operational infrastructure of traditional insurers. This leaves only one possible way for an effective digital transformation in insurance industry: both players must understand each other in order to survive.
Digital insurance: a new player on the market
Digital insurance has arrived thanks to new companies that combine innovative technological developments with insurance. These new players, known as insurtech (insurance and technology), have taken advantage of the digital transformation in insurance industry and incorporate the application of techniques such as Artificial Intelligence, the Internet of Things, Machine Learning and Big Data to the insurance sector.
All of this has led to the birth of startups focused on offering disruptive digital insurance policies. In addition, the consolidation of digital insurance has been fuelled by the current post-pandemic situation, with customers seeking efficiency, transparency, speed and agility.
According to the Insurtech Global Outlook 2021 report prepared by Everisy NTT Data, total capital invested in 2020 reached $6 billion. In the same vein, according to KPMG experts, last year total investment in digital insurance recorded the highest global investment figure, exceeding €5.8 billion. In the first quarter of 2021, investment in this industry on a global scale has reached a new high, $2.55 billion corresponding to 146 deals, according to the latest quarterly Insurtech report prepared by Willis Towers Watson.
Digitalisation of the funeral industry
The digital transformation in insurance industry has also reached funeral policies to offer a different, innovative and simple service thanks to technological tools such as blockchain and smart contracts, which make it possible to verify the death of a person and automatically notify all parties involved to make any type of administrative procedure or even the execution of the inheritance easier.
They also incorporate the use of social networks and other applications to organise funerals and virtual tributes into their portfolio of services. Another highly interesting option is digital wills and the option to authorise the cancellation of all social network accounts or the transfer of passwords to a trusted person.
Insurance industry trends
Optimising the customer acquisition process
In addition to creating new products and services, the digital transformation in insurance industry will be marked by the reinvention of the customer onboarding process thanks to the eKYC (Electronic Know Your Customer) system. With this improvement, the process of acquiring or subscribing new users has been optimised. It also ensures that customers can easily and quickly access all services and products offered by an organisation by being integrated into the database. This trend is one of the most sought-after appeals for traditional insurers, which still maintain their own customer acquisition processes.
Unification of branches
Accenture’s experts also foresee a progressive unification of the life, health and wealth insurance industries. This combination will generate almost EUR 1.1 billion in additional revenues. This includes more than EUR 530 million in smart health products, more than EUR 350 million in products and services for the elderly and more than EUR 260 million in life and wealth management.
For this reason, traditional insurers are already exploring the possibility of adding new digital policies to their portfolios. They are also working on potential synergies with successful startups to tap into new revenue opportunities and retain customers looking for innovative digital offerings.
Bidding for services
Traditional or tech insurers can increase their services and adapt to new trends in the insurance industry thanks to platforms such as World Funeral Net (WFN). The world’s first global funeral tendering service is also available to insurers to be able to put a service out to tender, choose the best providers from a wide international network and therefore reduce costs by accessing a larger network of providers.
With WFN, it is possible to offer more competitive products by reducing claims expenditure.
In this sense, WFN offers a cost-effective alternative for insurance companies to meet their policy commitments with a reduction in the cost of provision, an increase in the quality of services and greater service traceability. Moreover, as a globally extended platform, it allows insurers to maintain an international network of contacts. With WFN, it is possible to offer more competitive products by reducing claims expenditure. Other advantages that make it a key player in the digital transformation in insurance industry are:
- Thanks to the Dutch auction system used by WFN, tenders are awarded in a very limited time, which speeds up any procedure in the realisation of a funeral service.
- It does not require any investment in technology, servers or cloud storage. You simply need a device with internet access.
- Insurers can benefit from an active 24/7 service without the need to add the fixed structural costs of hiring workers, structures or satellite platforms to maintain the service.