A positive trend emerging is the discussion in the life sector on building a comprehensive and fully digital customer journey which reuses information already gathered.The client experiences this through better, faster and more targeted goods and services.A positive trend emerging is the discussion in the life sector on building a comprehensive and fully digital customer journey which reuses information already gathered.The client experiences this through better, faster and more targeted goods and services.
While the world has undergone extraordinary changes in technology that have revolutionised the consumer experience ove r the last decade, much in the world of insurance has remained the same.There are many antiquated back office systems and an approach to underwriting and risk that is laborious and detrimental to sales. Many sectors have used techn ology as an enabler for generating growth and expanding their customer base by stream lining and analysing how and when data is captured, used and processed.The life sector has thus far used technology to reduce processing cost and at best to try and convert those already engaged but has not used it to create new demand.
A positive trend emerging is the discussion in the life sector on building a comprehensive and fully digital customer journey which reuses information already gathered.The client experiences this through better, faster and more targeted goods and services.The insurance and reinsurance industry have been slow to adapt. There is no Apple or Amazon in the protection world, but there is no inherent reason why there shouldn't be if technology was embraced smarter. However, not all technology change is good. For example, technology has been used to cut premiums and profit margins through non-advised sales and aggregators. At a simple level, technology automates manual processes and record keeping and will cut cost and time. That is a good outcome and of course it makes sense for any industry to put such solutions in place. Aggregators have been very successful in general insurance using this approach as there is naturally annual chum.
This is not the case in the life sector. The trouble with this type of usage of technology leads reinsurers and insurers on a race towards low quality and low margins where neither the vendor nor the consumer benefits in the long run and can lead to longer term structural issues, putting reserving I risk premiums under downward pressure. We would rather see technology used in the insurance and reinsurance industry to create more choice and value and find underserved markets. Disruption will happen as a result as bargaining power moves to consumer and the current domination of distribution is broken.
Our opportunity is to grow the market and create more value for consumers in the way that has happened in other industries, such as the travel industry. There, despite the disruption of the internet, high premium transactions are still done face to face where expertise and value is added through bespoke planned holidays, while the massmarket serves itself digitally by booking flights and hotels online directly with those providers.
If technology through the likes of automated advice is going to fill the gaps that post-RDR traditional advice cannot fulfil because it is not cost-effective, there is still a place for creating value for the high-end market. We would not be surprised to see companies with established brands and digital supply chains, like Amazon and Google, take advantage of a cost leadership or differentiation position to engage the market. Knowing how data hungry these digital giants are, it may well be that the low-cost end of the market could self-serve, or be distributed with other offers and paid for by the value of the data those digital distributors can capture.
The challenge for life industry in serving the higher end model is to build it using technology that empowers intermediaries. We want to build solutions that enable quick and secure cross-selling using client data across all segments of financial advice, allow intermediaries to tailor their solutions to individual clients rather than simply to push down premiums. Such systems benefit the customers, their advisers and the product providers, but we need to ensure it is used to add value and price things fairly not simply to make things cheap and, by extension, lower quality. The life sector needs to grow its brand in the eyes of advisers and consumers and tech can do that if conceived and built correctly.