Insurers selective on digital agenda

When the UK’s largest insurer described its digital transformation as like “moving from an old dial telephone to an iPhone 5S in one go”, the industry sat up and took note.

Aviva’s multimillion pound technology overhaul will make it Europe’s first major insurer with a system that integrates underwriting and claims software on one platform, and will completely transform how the insurer operates and interacts with customers and brokers.

The insurer’s digital overhaul echoes the results of an Insurance Times survey, which found that insurers are increasingly recognising the importance of implementing digital services.

The poll of 35 digital decision-makers – ranging from chief executives to technology officers – was done in partnership with management consultancy Baringa and technology provider Mastek, and aimed to define what ‘being digital’ means to some of the UK’s largest insurers.

“People don’t think anymore that ‘being digital’ means just having a website and an online journey,” says Baringa partner David Wilson. “It incorporates everything from marketing to quote and buy, claims notification and tracking.”

The survey found that 75% of insurers feel there is a demand to progress faster with a digital agenda but more than 50% cite technology capacity and capability as barriers. This suggests insurers want to pursue digital initiatives but lack the expertise (see below).

A highlight of the report was respondents’ opinions on where the insurance industry sits in relation to competitors and other industries in providing digital services.

About 80% of respondents felt the insurance industry lagged other sectors such as retail, but almost half (49%) felt they were on par with their peers, and a further 20% believed they were ahead of them in the digital space.

“We’ve got 70% of our respondents that don’t feel their digital strategy is a competitive disadvantage within the insurance industry,” Wilson says.

Consumer demand

So why are insurers pushing to advance their digital strategy, if not for competitive advantage?

First, there’s a strong consumer demand to do so (cited by 70% of respondents as being the most critical factor driving digital change). But perhaps more pressing is the threat from retailers and other financial services firms crossing over into the insurance sector.

“Insurers are worried about retailers moving over because they’ve already got the customer,” Wilson says. “If you’re only interacting with your customers once a year during renewal, or at times of claim, how do you replicate the retailer model?”

But Mastek principal consultant, insurance Vinay Nagwekar says the threat from other sectors is not a strong enough driver for many insurers.

“Less than 50% have digitalisation in their top three strategic priorities and 30% of respondents do not even have a digital strategy,” Nagwekar says.

Budget allocation for digital initiatives also varies widely between providers, from just 5% to 80% of their change budget.

One insurer upgrading its IT platform is Direct Line Group. For customers there will be new websites for its Churchill, Privilege and Direct Line brands and new mobile platforms.

DLG chief information officer Angela Morrison says she expects the digital plans “to improve the customer quote and buy journey significantly, thus leading to improved conversion rates”.

But chief executive Paul Geddes, speaking in an interview with Insurance Times in January, offered a word of caution: “The danger of using the words ‘digital insurer’ in a consumer business like ours is that it might create the vision of a very impersonal or robotic business. And I don’t believe that’s what customers want in our sector.”

The challenges and opportunities of digital insurance will be one of the key points for discussion at Insurance Times’s The Digital Insurer event, being held on 29 April in London.